Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

HD Hyundai Heavy Industries  / Event-Driven

<div class="content-highlight"><p>Hyundai Heavy Industries (HHI) announced its book building results and the IPO has been determined at 60,000 won, which was at the high end of the IPO price range. The demand ratio among the institutional investors was very strong at 1,836 to 1. There were 1,633 institutional investors that participated in the IPO survey of which 1,285 were domestic investors and 348 were overseas investors. </p></div><table class="table table-striped">
<colgroup>
<col>
<col span="4">
</colgroup>
<tbody>
<tr>
<td colspan="4" style="width: 470pt;"><div><strong>Institutional Investors Demand Breakdown of Hyundai Heavy Industries IPO Bookbuilding Results</strong></div></td>
<td style="width: 106pt;"><strong> </strong></td>
</tr>
<tr>
<td style="text-align: left;"><strong>Domestic Investors</strong></td>
<td style="text-align: center;"><strong> </strong></td>
<td style="text-align: center;"><strong> </strong></td>
<td style="text-align: center;"><strong> </strong></td>
<td style="text-align: center; width: 106pt;"><strong> </strong></td>
</tr>
<tr>
<td><strong> </strong></td>
<td style="text-align: center;"><strong>Asset mgmt companies</strong></td>
<td style="text-align: center;"><strong>Brokerages</strong></td>
<td style="text-align: center;"><strong>Pension funds/insurance/banks</strong></td>
<td style="text-align: center; width: 106pt;"><strong>Others</strong></td>
</tr>
<tr>
<td>No. of companies</td>
<td style="text-align: center; width: 106pt;">587</td>
<td style="text-align: center; width: 106pt;">40</td>
<td style="text-align: center; width: 106pt;">276</td>
<td style="text-align: center; width: 106pt;">382</td>
</tr>
<tr>
<td><strong>Demand</strong></td>
<td style="text-align: center; width: 106pt;"><strong>692 to 1</strong></td>
<td style="text-align: center; width: 106pt;"><strong>46.7 to 1</strong></td>
<td style="text-align: center; width: 106pt;"><strong>318.1 to 1</strong></td>
<td style="text-align: center; width: 106pt;"><strong>492.3 to 1</strong></td>
</tr>
<tr>
<td> </td>
<td style="text-align: center;"> </td>
<td style="text-align: center;"> </td>
<td style="text-align: center;"> </td>
<td style="text-align: center; width: 106pt;"> </td>
</tr>
<tr>
<td><strong> Overseas Investors</strong></td>
<td style="text-align: center;"><strong> </strong></td>
<td style="text-align: center;"><strong> </strong></td>
<td style="text-align: center;"> </td>
<td style="text-align: center; width: 106pt;"> </td>
</tr>
<tr>
<td><strong> </strong></td>
<td style="text-align: center;"><strong>(A)*</strong></td>
<td style="text-align: center;"><strong>(B)**</strong></td>
<td style="text-align: center;"> </td>
<td style="text-align: center; width: 106pt;"> </td>
</tr>
<tr>
<td>No. of companies</td>
<td style="text-align: center; width: 106pt;">132</td>
<td style="text-align: center; width: 106pt;">216</td>
<td style="text-align: center;"> </td>
<td style="text-align: center; width: 106pt;"> </td>
</tr>
<tr>
<td><strong>Demand</strong></td>
<td style="text-align: center; width: 106pt;"><strong>71.3 to 1</strong></td>
<td style="text-align: center; width: 106pt;"><strong>215.4 to 1</strong></td>
<td style="text-align: center;"> </td>
<td style="text-align: center; width: 106pt;"> </td>
</tr>
<tr>
<td> </td>
<td style="text-align: center;"> </td>
<td style="text-align: center;"> </td>
<td style="text-align: center;"> </td>
<td style="text-align: center; width: 106pt;"> </td>
</tr>
<tr>
<td><strong>Total (No. of companies)</strong></td>
<td style="text-align: center; width: 106pt;"><strong>1,633</strong></td>
<td style="text-align: center;"> </td>
<td style="text-align: center;"> </td>
<td style="text-align: center; width: 106pt;"> </td>
</tr>
<tr>
<td><strong>Total Demand</strong></td>
<td style="text-align: center; width: 106pt;"><strong>1,835.9 to 1</strong></td>
<td style="text-align: center;"> </td>
<td style="text-align: center;"> </td>
<td style="text-align: center; width: 106pt;"> </td>
</tr>
<tr><td colspan="5" style="width: 576pt;">Note: (A)* refers to overseas investment mgmt companies that have records of trading with the brokers involved in this deal.</td></tr>
<tr><td colspan="5" style="width: 576pt;">(B)** refers to overseas investment mgmt companies that do not have records of trading with the brokers involved in this deal.</td></tr>
<tr>
<td colspan="2">Source: Company data</td>
<td> </td>
<td> </td>
<td style="width: 106pt;"></td>
</tr>
</tbody>
</table><p>Unlike major IPOs this year such as <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a>, and <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS) </a>which had numerous hallmarks of blockbuster positive outcomes post IPO, Hyundai Heavy Industries is a mixed bag, in our view. Despite surging new orders in 1H 2021, it remains to be seen if this is sustainable. There also remain a lot of question marks about the company's profitability as well as higher steel raw material costs, higher interest rates, and the M&amp;A of Daewoo Shipbuilding which may be blocked by regulators in EU/Japan.</p><p>Even the book building results imply a mixed bag. The high ratios of lock up period and high demand ratio are certainly very positive. Also, it has a low free float and solid employees subscription for the IPO shares. However, why did the institutional investors not indicate higher prices for the IPO (above 60,000 won)?</p>

Hyundai Heavy Industries (HHI) announced its book building results and the IPO has been determined at 60,000 won, which was at the high end of the IPO price range. The demand ratio among the institutional investors was very strong at 1,836 to 1. There were 1,633 institutional investors that participated in the IPO survey of which 1,285 were domestic investors and 348 were overseas investors. 






Institutional Investors Demand Breakdown of Hyundai Heavy Industries IPO Bookbuilding Results
 


Domestic Investors
 
 
 
 


 
Asset mgmt companies
Brokerages
Pension funds/insurance/banks
Others


No. of companies
587
40
276
382


Demand
692 to 1
46.7 to 1
318.1 to 1
492.3 to 1


 
 
 
 
 


 Overseas Investors
 
 
 
 


 
(A)*
(B)**
 
 


No. of companies
132
216
 
 


Demand
71.3 to 1
215.4 to 1
 
 


 
 
 
 
 


Total (No. of companies)
1,633
 
 
 


Total Demand
1,835.9 to 1
 
 
 

Note: (A)* refers to overseas investment mgmt companies that have records of trading with the brokers involved in this deal.
(B)** refers to overseas investment mgmt companies that do not have records of trading with the brokers involved in this deal.

Source: Company data
 
 



Unlike major IPOs this year such as KakaoBank (323410 KS), SK Bioscience (302440 KS), and SK IE Technology (361610 KS) which had numerous hallmarks of blockbuster positive outcomes post IPO, Hyundai Heavy Industries is a mixed bag, in our view. Despite surging new orders in 1H 2021, it remains to be seen if this is sustainable. There also remain a lot of question marks about the company's profitability as well as higher steel raw material costs, higher interest rates, and the M&amp;A of Daewoo Shipbuilding which may be blocked by regulators in EU/Japan.Even the book building results imply a mixed bag. The high ratios of lock up period and high demand ratio are certainly very positive. Also, it has a low free float and solid employees subscription for the IPO shares. However, why did the institutional investors not indicate higher prices for the IPO (above 60,000 won)?

Hyundai Heavy Industries - Trading Strategy Post Book Building Results

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/china-merchants-bank-co-ltd-3388a037-4214-4997-b45d-520518cfdb57" target="_blank" data-smartkarma-citation="entities:10987:1" rel="noopener">China Merchants Bank H (3968 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> and <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>, <a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> and <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>. Shorts increased in the Information Technology, Consumer Discretionary, Health Care and Real Estate sectors while decreasing in the Communication Services and Materials sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-osk-lines-ltd" target="_blank" data-smartkarma-citation="entities:20717:1" rel="noopener">Mitsui Osk Lines (9104 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/invesco-office-j-reit-inc" target="_blank" data-smartkarma-citation="entities:7414:1" rel="noopener">Invesco Office J Reit (3298 JP)</a>, <a href="https://www.smartkarma.com/entities/odakyu-electric-railway-co-ltd" target="_blank" data-smartkarma-citation="entities:5405:1" rel="noopener">Odakyu Electric Railway (9007 JP)</a>, <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec Corp (6920 JP)</a>, <a href="https://www.smartkarma.com/entities/jsr-corp" target="_blank" data-smartkarma-citation="entities:17620:1" rel="noopener">JSR Corp (4185 JP)</a>, <a href="https://www.smartkarma.com/entities/keio-corp" target="_blank" data-smartkarma-citation="entities:1223:1" rel="noopener">Keio Corp (9008 JP)</a>. Shorts increased in most sectors led by the Industrials, Consumer Discretionary, Information Technology, Consumer Staples and Materials stocks.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a>, <a href="https://www.smartkarma.com/entities/kumho-petro-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:2014:1" rel="noopener">Kumho Petro Chemical (011780 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Inc (034730 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a>, <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">Oci Co Ltd (010060 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-biologics-co-ltd" target="_blank" data-smartkarma-citation="entities:22932:1" rel="noopener">Samsung Biologics Co., (207940 KS)</a> and <a href="https://www.smartkarma.com/entities/korea-shipbuilding-offshore-engineering-co-ltd" target="_blank" data-smartkarma-citation="entities:10155:1" rel="noopener">Korea Shipbuilding &amp; Offshore Engineering (009540 KS)</a>. </p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/ase-technology-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:27270:1" rel="noopener">ASE Technology Holding Co Ltd (3711 TT)</a>, <a href="https://www.smartkarma.com/entities/taishin-financial-holding" target="_blank" data-smartkarma-citation="entities:715:1" rel="noopener">Taishin Financial Holding (2887 TT)</a> and <a href="https://www.smartkarma.com/entities/momo-com-inc" target="_blank" data-smartkarma-citation="entities:8403:1" rel="noopener">Momo.Com Inc (8454 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/china-steel-corp" target="_blank" data-smartkarma-citation="entities:962:1" rel="noopener">China Steel (2002 TT)</a>, <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 TT)</a>, <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> and <a href="https://www.smartkarma.com/entities/taiwan-business-bank" target="_blank" data-smartkarma-citation="entities:18958:1" rel="noopener">Taiwan Business Bank (2834 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Alibaba Group (9988 HK), China Merchants Bank H (3968 HK), JD.com Inc. (9618 HK), Xiaomi Corp (1810 HK) and Kuaishou Technology (1024 HK) while there was short covering on Tencent (700 HK), Ping An Insurance (H) (2318 HK), Anta Sports Products (2020 HK), Shenzhou Intl Group Holdings (2313 HK) and HKEX (388 HK). Shorts increased in the Information Technology, Consumer Discretionary, Health Care and Real Estate sectors while decreasing in the Communication Services and Materials sectors.In Japan, stocks increased on Shiseido Company (4911 JP), Fast Retailing (9983 JP), Yaskawa Electric (6506 JP), Canon Inc (7751 JP) and Mitsui Osk Lines (9104 JP) while there was short covering on Invesco Office J Reit (3298 JP), Odakyu Electric Railway (9007 JP), Lasertec Corp (6920 JP), JSR Corp (4185 JP), Keio Corp (9008 JP). Shorts increased in most sectors led by the Industrials, Consumer Discretionary, Information Technology, Consumer Staples and Materials stocks.In Korea, shorts increased on NCSOFT Corp (036570 KS), LG Display (034220 KS), Kumho Petro Chemical (011780 KS), SK Inc (034730 KS) and Samsung Electronics (005930 KS) while shorts were covered on SK Telecom (017670 KS), Celltrion Inc (068270 KS), Oci Co Ltd (010060 KS), Samsung Biologics Co., (207940 KS) and Korea Shipbuilding &amp; Offshore Engineering (009540 KS). In Taiwan, shorts increased on Evergreen Marine Corp (2603 TT), Mediatek Inc (2454 TT), ASE Technology Holding Co Ltd (3711 TT), Taishin Financial Holding (2887 TT) and Momo.Com Inc (8454 TT) while shorts covered on TSMC (2330 TT), China Steel (2002 TT), Wan Hai Lines (2615 TT), United Microelectronics Corp (2303 TT) and Taiwan Business Bank (2834 TT). 

Asia Shorts: Alibaba, CMB, Tencent, Anta, Shiseido, Odakyu, Keio, NC Soft, LGD, SK Tel, Evergreen

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

HD Hyundai Heavy Industries  / Equity Capital Markets

<h2>Attractive valuation compared with Samsung Heavy Industries</h2><p>Hyundai Heavy Industries' IPO book was opened yesterday.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'>Book open</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44434}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 08. 26</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44442}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 09. 03</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'>Allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44445}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 09. 06</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'>Subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44446}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 09. 07</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44449}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 09. 10</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>TBD</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>In terms of valuation, the general view of the local investment industry is that it is okay. HHI's valuation stands out even more when compared to the issue price of Samsung Heavy's rights offering, which is HHI's direct local peer.</p><p>In general, order-receiving industries such as shipbuilding calculate valuations based on PBR. Based on yesterday's closing price and 2Q net assets, Samsung Heavy Industries' PBR stands at 1.28x. Considering the rights offering discount rate (15%), the offering price features a PBR of 1.09x.</p><p><strong>On the other hand, the offering price for Hyundai Heavy Industries is 0.77x at the lower end of the band and 0.89x at the upper end of the band. This means that Hyundai Heavy Industries is offering shares at a discount of up to 25% compared with Samsung Heavy Industries.</strong></p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'>Price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":52000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩52,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":60000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩60,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":936}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩936.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1080}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩1,080.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Institutional allotment (55%)"}'>- Institutional allotment (55%)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":514.8000000000001}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-1]C[0]*55%">₩514.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":594}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-1]C[0]*55%">₩594.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'>Implied market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4616.202032}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-3]C[0]*R24C3/1000000000">₩4,616.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5326.38696}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-3]C[0]*R24C3/1000000000">₩5,326.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'>- Discount</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2981887872162388}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R25C3-R[-4]C[0])/R25C3">29.82%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1902178314033525}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R25C3-R[-4]C[0])/R25C3">19.02%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'>PBR</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7730160274911052}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-2]C[0]/sum(R21C3:R22C3)">0.77x</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8919415701820443}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-2]C[0]/sum(R21C3:R22C3)">0.89x</td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><div class="content-highlight"><p><strong>Considering that Hyundai Heavy Industries is the No. 1 player in the local shipbuilding industry and Samsung Heavy Industries has been in the red for the past eight years, it seems clear that HHI's IPO price is attractive.</strong></p></div>

Attractive valuation compared with Samsung Heavy IndustriesHyundai Heavy Industries' IPO book was opened yesterday.





Schedule

Book open
2021. 08. 26


Book close
2021. 09. 03


Allotment
2021. 09. 06


Subscription
2021. 09. 07


Payment
2021. 09. 10


Listing
TBD

Source: DART

In terms of valuation, the general view of the local investment industry is that it is okay. HHI's valuation stands out even more when compared to the issue price of Samsung Heavy's rights offering, which is HHI's direct local peer.In general, order-receiving industries such as shipbuilding calculate valuations based on PBR. Based on yesterday's closing price and 2Q net assets, Samsung Heavy Industries' PBR stands at 1.28x. Considering the rights offering discount rate (15%), the offering price features a PBR of 1.09x.On the other hand, the offering price for Hyundai Heavy Industries is 0.77x at the lower end of the band and 0.89x at the upper end of the band. This means that Hyundai Heavy Industries is offering shares at a discount of up to 25% compared with Samsung Heavy Industries.







Pricing
Low
High


Price
₩52,000
₩60,000


Base deal size
₩936.0B
₩1,080.0B


- Institutional allotment (55%)
₩514.8B
₩594.0B


Implied market cap
₩4,616.2B
₩5,326.4B


- Discount
29.82%
19.02%


PBR
0.77x
0.89x

Source: DART

Considering that Hyundai Heavy Industries is the No. 1 player in the local shipbuilding industry and Samsung Heavy Industries has been in the red for the past eight years, it seems clear that HHI's IPO price is attractive.

Hyundai Heavy Industries IPO: Litigation Risks

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<div><p><a href="https://www.smartkarma.com/entities/hyundai-heavy-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:33808:1" rel="noopener">Hyundai Heavy Industries (1748326D KS)</a> is looking to raise up to US$925m in its Korea IPO. </p></div><div>
<p>Hyundai Heavy Industries (HHI) is a South Korea shipbuilder. The company is wholly owned by <a href="https://www.smartkarma.com/entities/korea-shipbuilding-offshore-engineering-co-ltd" target="_blank" data-smartkarma-citation="entities:10155:1" rel="noopener">Korea Shipbuilding &amp; Offshore Engineering (009540 KS)</a>  after the latter’s spin-off in 2019.</p>
<p>In this note, we share our final thoughts on valuation and deal dynamics.</p>
</div><p>Our previous coverage of the IPO:</p><ul><li dir="ltr" aria-level="1"><p><a href="https://www.smartkarma.com/insights/hyundai-heavy-ipo-sharp-1h21-recovery-accompanied-with-a-surge-in-costs" target="_blank" data-smartkarma-citation="insights:56070" rel="noopener">Hyundai Heavy IPO - Sharp 1H21 Recovery Accompanied with a Surge in Costs</a> </p></li></ul>

Hyundai Heavy Industries (1748326D KS) is looking to raise up to US$925m in its Korea IPO. 
Hyundai Heavy Industries (HHI) is a South Korea shipbuilder. The company is wholly owned by Korea Shipbuilding &amp; Offshore Engineering (009540 KS)  after the latter’s spin-off in 2019.
In this note, we share our final thoughts on valuation and deal dynamics.
Our previous coverage of the IPO:Hyundai Heavy IPO - Sharp 1H21 Recovery Accompanied with a Surge in Costs 

Hyundai Heavy IPO - Expensive Valuation and Korea Shipbuilders Have Been Trading Weak

<div class="content-highlight">
<p>Our base case valuation of Hyundai Heavy Industries is implied market cap of 5.9 trillion won or 66,573 won per share, which is 11% higher than the high end of the IPO price range of 60,000 won per share.</p>
<p>Typically, we like to rate an IPO positive if our base case valuation is at least 15% higher than the high end of the IPO price range and as such we have a NEGATIVE view of this IPO. The valuation sits on the borderline case and our base case valuation does not provide a big upside to the IPO price range. </p>
</div><p>Our base case valuation is based on 1x our estimated equity of 6.1 trillion won for the company at the end of 2021. Our valuation multiple of 1.0x P/B is based on the average P/B valuation multiple of the peers.</p><p>HHI had 22.7% market share of new orders for shipbuilding in 2020, rising to 24.1% in 1Q 2021. It had new orders of 3,2m GT in 1Q 2021, which was nearly 84% of total new orders in 2020. </p>


Our base case valuation of Hyundai Heavy Industries is implied market cap of 5.9 trillion won or 66,573 won per share, which is 11% higher than the high end of the IPO price range of 60,000 won per share.
Typically, we like to rate an IPO positive if our base case valuation is at least 15% higher than the high end of the IPO price range and as such we have a NEGATIVE view of this IPO. The valuation sits on the borderline case and our base case valuation does not provide a big upside to the IPO price range. 
Our base case valuation is based on 1x our estimated equity of 6.1 trillion won for the company at the end of 2021. Our valuation multiple of 1.0x P/B is based on the average P/B valuation multiple of the peers.HHI had 22.7% market share of new orders for shipbuilding in 2020, rising to 24.1% in 1Q 2021. It had new orders of 3,2m GT in 1Q 2021, which was nearly 84% of total new orders in 2020. 

Hyundai Heavy Industries IPO Valuation Analysis

South Korea

HD Korea Shipbuilding & Offshore Engineering Co., Ltd. operates as a shipbuilding and offshore company. The Company provides industrial plant engineering, special and naval shipbuilding, marine engine and machinery, industrial machinery and energy services. HD Korea Shipbuilding & Offshore Engineering markets its products worldwide.

HD Korea Shipbuilding & Offshore Engineering (009540 KS)

HD Korea Shipbuilding & Offshore Engineering

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HD Korea Shipbuilding & Offshore Engineering (009540 KS)

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