CJ Olive Young's value soars to W4 tril.

Beauty chain CJ Olive Young / Yonhap

By Anna J. Park

CJ Olive Young, the country's largest health and beauty chain, is preparing for an initial public offering (IPO) on the local stock market next year, and has chosen Mirae Asset Securities and Morgan Stanley as its main “book runners” for the process.

According to the investment banking industry, Thursday, Olive Young also selected KB Securities and Credit Suisse as underwriters for the listing. Local and global securities firms competed for the book runner and underwriter positions early last week.

Olive Young's corporate valuation is currently estimated to be around four trillion won ($3.4 billion), more than double the pre-IPO valuation calculated earlier this year. Glenwood Private Equity bought an over 25 percent stake in the beauty chain in March for 414 billion won, giving it a valuation of around 1.7 trillion won.

Founded in 1999, CJ Olive Young has 1,300 stores across Korea, with strong on- and off-line distribution channels. It also has delivery networks in about 150 countries worldwide.

Industry watchers say that the company's dominant position as a top health and beauty store brand, as well as its unique distribution channels, are key aspects of its competitiveness in the IPO process.

Given that the earnings before interest, tax, depreciation and amortization (EBITDA) last year were 300 billion won and that this is expected to exceed 350 billion won for 2021, market experts say the firm's overall valuation of over 3.5 trillion won is easily justified.

The beauty chain reported third quarter revenue of 554 billion won, a 22.2-percent jump from the same period last year. Nearly 25 percent of this come from sales online.

“CJ Olive Young enjoys an overwhelming leading position, as the firm has an about 85 percent share in local health and beauty stores,” Lee Seung-woong, an equity analyst at eBest Investment & Securities, said.

Also the market is closely watching whether the listing will have an impact on CJ Group's management structure.

As Lee Sun-ho, the eldest son of CJ Group Chairman Lee Jae-hyun, and his sister, Lee Kyung-hoo, executive vice president of CJ ENM, each have 11.09 percent and 4.21 percent stakes in Olive Young, a successful IPO could provide them with ample liquidity to secure more common shares of CJ Group to consolidate their control over the conglomerate.