Is the crumbs of Dubon Korea_Jongwon Baek worth picking up?

Is the crumbs of Dubon Korea_Jongwon Baek worth picking up?

CEO Jongwon Baek of Dubon Korea is, in name and reality, the biggest star in the Korean F&B market. Currently, no one has more than CEO Baek's presence in the Korean F&B market, and historically, individuals who have enjoyed more than CEO Baek's popularity in the market are selected. However, the question of whether his crumbs are sufficiently worth the investment from the perspective of ordinary investors remains unknown.

There were a lot of comments up to the listing. Overall, the atmosphere was not warm. Before the listing, an article was posted in a major economic magazine that mocked "How smart a person would have been if there were no such a smart person" and would be paid to such companies. To put it bluntly, Dubon Korea was a stock that received a lot of attention, not a stock that received a lot of expectations.

However, time has passed and it has already been three months since Jongwon Baek CEO Dubon Korea went public. Unfortunately, the trend of stock prices since the listing has not reversed this cynicism. As of Feb. 6, Dubon Korea's stock price was W30,000, a sluggish result that is about 12 percent below the initial public offering price of W34,000.

Different people may have different interpretations, but I believe there is nothing to be wronged about the current slump in stock prices. If anything, investing in Dubon Korea stocks does not seem to be any different from burning money in the crumbs of the CEO of Jongwon Baek from an investor's point of view.

As everyone knows, Durbon Korea is far from a technology innovation company. Simply put, it's an ordinary F&B franchise company. Except for Jongwon Baek, there's nothing special about it. When I say this, I feel like I'm talking about something very negative, but it's actually not, it's just neutral. Technological innovation is not a prerequisite for listing, and not all companies seeking to be listed need to be such electrical companies.

Dubon Korea has two advantages: one is excellent financial statements, and the other is the presence of Jongwon Baek.

If you look at Dubon Korea's financial statements, first of all, its recent performance is simply good. The company maintained an annual sales growth of 45% during the '21-23, while also maintaining a good defense of its net profit margin to a level that is not much different from the past. Its capital debt ratio is also stable. It is not particularly flawless.

Next, the existence of a star CEO named Baek Jong-won is Durbon Korea's best weapon. Everyone can disagree on how well Jongwon Baek does business and develops his or her cooking. However, no one can deny Baek's showmanship and what his popularity is contributing to the company now.

Mr. Jongwon Baek is literally a "star." He is like a star. He drives around countless fans. Mr. Baek has a formidable marketing manpower. Everything about Jongwon Baek is talked about, from Jongwon Baek's words, Jongwon Baek's actions to other people's comments about Jongwon Baek. This kind of influence is not derived from the so-called "huruku." He is a businessman before he is a chef, and a showman before he is a businessman. That's how much Mr. Jongwon Baek has a great sense of the public.

His presence provides Durbon Korea with one of the most important things in the F&B industry, or any industry. In other places, you need to spend a lot of time and money to make even a brief wink, but Durbon Korea can provide a hot topic to millions of Koreans with just the use of Jongwon Baek. This is the best moat that Durbon Korea has.

But the reason why I disparaged Dubon Korea's stock with the derogation of "the crumbs of Jongwon Baek" despite witnessing these beautiful things is because there is definitely a darkness that cannot be hidden in the stock of this company.

To summarize the reasons why I evaluate Dubon Korea negatively, there are a total of four reasons: (1) Portfolio management/production capacity of major shareholders with exceptional levels (2) Distrust of the feasibility of the provided equity story (4) Excessive dependence on the character Baek Jong-won.

First of all, I will talk about the (1) shareholding issue. Currently, the share of Jongwon Baek representatives and related parties in Dubon Korea is around 75%. Such a share structure is by no means common. According to the 2024 KDI report, the average friendly share of the largest shareholder of 2,407 listed companies in Korea as of the end of 2023 is 43.07 percent (KOSPI: 49.34 percent, KOSDAQ: 39.93 percent), so 75% of Dubon Korea should be considered a pretty unusual case in the Korean market as well.

Of course, just because a phenomenon is unusual doesn't necessarily mean it's a problem, but you need to be clear about its implications for individual investors. In my case, I'd like to point out two major implications.

First, from an investor's point of view, buying shares of Dubon Korea now can never be an investment in that Enterprise. Currently, Dubon Korea is a dictatorship in the Jongwon Baek due to its equity structure. Therefore, there is no possibility that the purchase of circulating shares will be promised by participation in Enterprise.

In the first place, the company only receives equity investments due to its governance structure, so it is very funny that it is trying to apply EV-based multiplexes to Dubon Korea. Because the ownership of 'Enterprise' Dubon Korea is only owned by Jongwon Baek. Therefore, it is reasonable that this company only applies multiplexes for equity investors such as PBR and PER. This may not be a big problem for a company that boasts high net income and dividend rates, but unfortunately, this is not the case at all for Dubon Korea at the moment. It is a clear discount factor.

Second, the proportion of the available distribution volume is disastrous. While the volatility generated by limited distribution volume may help to form a dramatic rally in the short term, it is unclear whether it will also contribute to the long-term flow of stock prices in a situation where the nature of Jongwon Baek theme stocks is already thick. Also, the lack of distribution volume is Jongwon Baek and related parties