Screen golf maker hits jackpot in market capitalization

Screen golf machine producer GolfZon saw its market capitalization exceed 1 trillion won (924 million U.S. dollars) as soon as it was listed on the tech-heavy KOSDAQ Friday.

The company was the first to achieve the milestone in 11 years since the peak of the KOSDAQ market bubble in 2000 and the fifth following Asiana Airline and Hansol PCS. GolfZon`s share price, however, tanked on the same day.

○ From zero revenue to W1 trillion in market capitalization

The company ranked eighth among companies on the KOSDAQ in market capitalization with the initial transaction price of the company`s stock reaching 94,400 won (87 dollars), up 11.09 percent from the initial offering price of 85,000 won (79 dollars). But its share price closed at 85,500 won (79 dollars) as investors sold its shares en masse to rake in trading profits.

Established in May 2000, GolfZon generated no revenue in its initial two years because it started developing products and opening up the market after the establishment. It has emerged as a leading screen golf company with the market share of 84.24 percent, however, and membership of 1 million, almost half of the 2.1 million people playing golf in Korea.

Sales volume skyrocketed from 1 billion won (924,000 dollars) in 2002 to 184.3 billion won (170 million dollars) last year. Despite the hefty initial offering price, competition for stocks in the company`s public offering was 209.64 to 1.

After the company went public, Kim Yeong-chan and his son Kim Won-il, the co-heads of the company, have grown rich. Their combined shares are worth 637 billion won (588 million dollars), with the former holding 1,976,838 shares (16.09%) and the latter 5,473,710 (44.56%).

Opinions on the prospects of the company are mixed, however, due to the high initial offering price and the question of its growth potential.

Moon Hyeon-shik, an analyst at NH Investment Securities, said, "Many companies have seen their share prices plummet below initial offering prices because of massive sell-offs shortly after listing. However, fears over less room for further rises have led GolfZon shares to plummet as its initial offering price was too high due to the participation of institutional investors."

“What is certain is that GolfZon`s sales of its main product golf simulators will no longer rise due to the saturation of the screen golf market,” he added.

In contrast, Han Seung-ho, an analyst at Shinyeong Securities, said, "The correction phase of the stock market has affected the massive selling of the company`s shares," adding, "Considering factors such as the popularity of golf and retirement funds, the screen golf market is still promising and profits will be generated from its new businesses such as golf courses and content."

Kim Chang-gwon, an analyst at Daewoo Securities, reserved judgment, saying, "We should watch the results of the company`s overseas market penetration and the performance of its new businesses."

teller@donga.com