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.

Event-Driven

HD Korea Shipbuilding & Offshore Engineering / Event-Driven

HD Korea Shipbuilding & Offshore Engineering

<p>The listing of Hyundai Heavy Industries is due tomorrow, and the time has come to consider the timing of short-selling Korea Shipbuilding &amp; Offshore Engineering (KSOE) due to the holding company discount risk.</p><div class="content-highlight">
<p><strong>In general, we have often witnessed a trading pattern in which a holding company's stock price plummets when one of its major operating subsidiaries goes public.</strong></p>
<p><strong>The KSOE is also highly likely to be a target of this trading pattern.</strong></p>
</div><hr><p>KSOE is an intermediate holding company of Hyundai Heavy Industries Group, and its major subsidiaries include:</p><ul>
<li><strong>Hyundai Heavy Industries</strong></li>
<li><strong>Hyundai Mipo Dockyard</strong></li>
<li><strong>Hyundai Samho Heavy Industries</strong></li>
</ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/011/original/1.png?1631749332" class="editor-image img-responsive" data-smartkarma-image-id="230011"></figure></section><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
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<tbody>
<tr>
<td data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;KSOE's major subsidiaries&quot;}">KSOE's major subsidiaries</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Stake %"}'>Stake %</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Stake value"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B"}'>Stake value</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Note"}'>Note</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Mipo Dockyard Co., Ltd."}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Hyundai Mipo Dockyard</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"010620"}' data-sheets-formula='="010620"'>010620</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.424}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>42.40%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1298.9506391992}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B"}' data-sheets-formula='=googlefinance(R[0]C[-2], "price")*googlefinance(R[0]C[-2], "shares")/1000000000*R[0]C[-1]'><strong>₩1,298.95B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Market value"}'>Market value</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Heavy Industries"}'>Hyundai Heavy Industries</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Unlisted"}'>Unlisted</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7972}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>79.72%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4246.20608}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B"}' data-sheets-formula="=R[0]C[2]*R[0]C[-1]"><strong>₩4,246.21B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"At the IPO price"}'>At the IPO price</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Samho Heavy Industries"}'>Hyundai Samho Heavy Industries</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Unlisted"}'>Unlisted</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8054}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>80.54%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1200.213}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.00B"}'><strong>₩1,200.21B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Book value"}'>Book value</td>
</tr>
<tr><td colspan="5" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p>In fact, KSOE's biggest investment point so far is that it is the only channel through which to invest in Hyundai Heavy Industries and Hyundai Samho Heavy Industries, the world's largest shipyards.</p><div class="content-highlight"><p><strong>However, after Hyundai Heavy Industries is listed, the investment points of KSOE will inevitably fade. As KSOE is an intermediate holding company of Hyundai Heavy Industries Group, dividends and brand royalties from its subsidiaries such as Hyundai Heavy Industries will likely flow into the ultimate holding company, <a href="https://www.smartkarma.com/entities/hyundai-heavy-industries-holdings" target="_blank" data-smartkarma-citation="entities:24075:1" rel="noopener">Hyundai Heavy Industries Holdings (267250 KS)</a>, making it less attractive for investment.</strong></p></div><p>Nevertheless, its discount to NAV is 7.52% based on the current share price. This is significantly lower than the 50% level of the average discount rate of local holding companies.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"NAV"}' data-sheets-note="Sang Hyun Park: Cases when a company's net cash position and the value of its publically traded interests are worth more than its market cap create the opportunity of a stub trade, in which investors can take a view that the company's core business will rise by shorting the minority stakes whilst going long the underlying. Such an opportunity has arisen in the wake of the Alibaba listing which has seen early investing company Yahoo trade at a discount to the value of its stake in Alibaba.">NAV</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of listed holdings"}'><strong>Value of listed holdings (including Hyundai Heavy Industries)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5831.62191898336}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[8]C[5])"><strong>₩5,831.6B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of Holdco market cap"}'>- % of Holdco market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7012666341045598}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[-1]C[0]/((R[3]C[-3]*R[0]C[-3])/1000000000)">70.13%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of unlisted holdings"}'><strong>Value of unlisted holdings (which includes Hyundai Samho Heavy Industries)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1825.212}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[7]C[5])"><strong>₩1,825.2B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value"}'>Stub value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":659.0072110166407}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=(R[1]C[-3]*R[-2]C[-3]/1000000000)-R[-3]C[0]-R[-1]C[0]">₩659.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value per share"}'>Stub value per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9311.547212597516}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*1000000000/R[-3]C[-3]">₩9,312</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of operating assets"}'>Value of operating assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=SUM(R[8]C[5])">₩0.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV"}'>GAV</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7656.8339189833605}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-6]C[0]+R[-4]C[0]+R[-1]C[0]">₩7,656.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV per share"}'>GAV per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":108277.93228902365}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[4]C[-3]*1000000000">₩108,278</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to GAV (excl. treasury shares)"}'>Discount to GAV (excl. treasury shares)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.08517033449031985}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-4]C[-3])/R[-1]C[0]">-8.52%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (de-consolidated)"}'><strong>Holdco net cash/debt (de-consolidated)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1327.7}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[5]C[5]"><strong>₩1,327.7B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}'>Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=(R[-5]C[-3]*R[-2]C[-3]+R[-5]C[-2]*R[-2]C[-2])/1000000000">₩0.0B</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV"}'><strong>NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8984.533918983361}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-5]C[0]+R[-2]C[0]-R[-1]C[0]"><strong>₩8,984.5B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV per share (excl. treasury shares)"}'><strong>NAV per share (excl. treasury shares)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":127053.3964327235}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-1]C[-3]*1000000000"><strong>₩127,053</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to NAV"}'><strong>Discount to NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07519197991517018}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-9]C[-3])/R[-1]C[0]"><strong>7.52%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART","6":1}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table><p>As an intermediate holding company, KSOE plans to play a role as a control tower by conducting R&amp;D, M&amp;A, and new and renewable businesses, but at this point, its own operating operation is virtually non-existent. In other words, since the value of the operating operation is zero, the current valuation is based on the cash assets held and the value of the stake in the subsidiaries.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/013/original/2.png?1631750466" class="editor-image img-responsive" data-smartkarma-image-id="230013"></figure><p>Of course, it is true that KSOE's PBR is lower than the local peers in the same sector. However, there is a question as to whether it is appropriate to apply the PBR valuation as KSOE is a pure holding company rather than a shipbuilding company.</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":"PBR comparisons on FY2022E net assets"}'>PBR comparisons on FY2022E net assets</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"PBR"}'>PBR</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Mipo Dockyard Co., Ltd."}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Hyundai Mipo Dockyard</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"010620"}' data-sheets-formula='="010620"'>010620</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"1.31x"}'><strong>1.31x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Daewoo Shipbuilding &amp; Marine Engineering"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Daewoo Shipbuilding &amp; Marine Engineering</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"042660"}' data-sheets-formula='="042660"'>042660</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"1.25x"}'><strong>1.25x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung Heavy Industries Co.,Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Samsung Heavy Industries</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"010140"}' data-sheets-formula='="010140"'>010140</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"1.05x"}'><strong>1.05x</strong></td>
</tr>
<tr><td colspan="3"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Korea Shipbuilding &amp;Offshore Engn Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>Korea Shipbuilding &amp;Offshore Engn</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"009540"}' data-sheets-formula='="009540"'>009540</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"0.79x"}'><strong>0.79x</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'>Source: FnGuide</td></tr>
</tbody>
</table><p>Lastly, KSOE has an event to acquire Daewoo Shipbuilding &amp; Marine Engineering (DSME). Currently, the acquisition is awaiting approval from foreign countries.</p><p>If approved, KSOE will swap shares with Korea Development Bank through issuance of new shares. In other words, Korea Development Bank will hand over its stake in DSME (55.68%) to KSOE, and will receive a stake in KSOE instead. In this process, KSOE needs to issue more than 2 trillion won worthy of new shares. In other words, it is unlikely that this DSME acquisition event will lead to KSOE's valuation re-rating.</p>

The listing of Hyundai Heavy Industries is due tomorrow, and the time has come to consider the timing of short-selling Korea Shipbuilding &amp; Offshore Engineering (KSOE) due to the holding company discount risk.
In general, we have often witnessed a trading pattern in which a holding company's stock price plummets when one of its major operating subsidiaries goes public.
The KSOE is also highly likely to be a target of this trading pattern.
KSOE is an intermediate holding company of Hyundai Heavy Industries Group, and its major subsidiaries include:
Hyundai Heavy Industries
Hyundai Mipo Dockyard
Hyundai Samho Heavy Industries










KSOE's major subsidiaries
Ticker
Stake %
Stake value
Note


Hyundai Mipo Dockyard
010620
42.40%
₩1,298.95B
Market value


Hyundai Heavy Industries
Unlisted
79.72%
₩4,246.21B
At the IPO price


Hyundai Samho Heavy Industries
Unlisted
80.54%
₩1,200.21B
Book value

Source: DART &amp; KRX

In fact, KSOE's biggest investment point so far is that it is the only channel through which to invest in Hyundai Heavy Industries and Hyundai Samho Heavy Industries, the world's largest shipyards.However, after Hyundai Heavy Industries is listed, the investment points of KSOE will inevitably fade. As KSOE is an intermediate holding company of Hyundai Heavy Industries Group, dividends and brand royalties from its subsidiaries such as Hyundai Heavy Industries will likely flow into the ultimate holding company, Hyundai Heavy Industries Holdings (267250 KS), making it less attractive for investment.Nevertheless, its discount to NAV is 7.52% based on the current share price. This is significantly lower than the 50% level of the average discount rate of local holding companies.





NAV

Value of listed holdings (including Hyundai Heavy Industries)
₩5,831.6B


- % of Holdco market cap
70.13%


Value of unlisted holdings (which includes Hyundai Samho Heavy Industries)
₩1,825.2B


Stub value
₩659.0B


Stub value per share
₩9,312


Value of operating assets
₩0.0B


GAV
₩7,656.8B


GAV per share
₩108,278


Discount to GAV (excl. treasury shares)
-8.52%


Holdco net cash/debt (de-consolidated)
₩1,327.7B


Value of pref shares
₩0.0B



NAV
₩8,984.5B


NAV per share (excl. treasury shares)
₩127,053


Discount to NAV
7.52%

Source: KRX &amp; DART

As an intermediate holding company, KSOE plans to play a role as a control tower by conducting R&amp;D, M&amp;A, and new and renewable businesses, but at this point, its own operating operation is virtually non-existent. In other words, since the value of the operating operation is zero, the current valuation is based on the cash assets held and the value of the stake in the subsidiaries.Of course, it is true that KSOE's PBR is lower than the local peers in the same sector. However, there is a question as to whether it is appropriate to apply the PBR valuation as KSOE is a pure holding company rather than a shipbuilding company.







PBR comparisons on FY2022E net assets
Ticker
PBR


Hyundai Mipo Dockyard
010620
1.31x


Daewoo Shipbuilding &amp; Marine Engineering
042660
1.25x


Samsung Heavy Industries
010140
1.05x

 

Korea Shipbuilding &amp;Offshore Engn
009540
0.79x

Source: FnGuide

Lastly, KSOE has an event to acquire Daewoo Shipbuilding &amp; Marine Engineering (DSME). Currently, the acquisition is awaiting approval from foreign countries.If approved, KSOE will swap shares with Korea Development Bank through issuance of new shares. In other words, Korea Development Bank will hand over its stake in DSME (55.68%) to KSOE, and will receive a stake in KSOE instead. In this process, KSOE needs to issue more than 2 trillion won worthy of new shares. In other words, it is unlikely that this DSME acquisition event will lead to KSOE's valuation re-rating.

Outright Shorting KSOE or Long/Short Setup with HHI on a Likely Widening Holdco Discount

Equity Capital Markets

HD Hyundai Infracore / Equity Capital Markets

<h2>Overview</h2><p>This is again an offering to the stockholders with forfeited shares going to a public offering. A total of 115 million new shares are issued, and the tentative issuance price is set at ₩6,950. So, the total issuance size is ₩0.8T.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Overview"}'>Overview</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target"}'>Target</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A public offering of forfeited shares after offering to stockholders"}'>A public offering of forfeited shares after offering to stockholders</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transferability"}'>Transferability</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Renounceable"}'>Renounceable</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Volume"}'><strong>Offering volume</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":115107913}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>115,107,913</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary price"}'><strong>Preliminary price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6950}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>₩6,950</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary value"}'><strong>Preliminary value</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":799999995350}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]*R[-1]C[0]"><strong>₩799,999,995,350</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Oversubscription privilege"}'>Oversubscription privilege</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KB, NH, KIS, Mirae Asset, Hana, Samsung, DB, Daishin, &amp; Hi"}'>KB, NH, KIS, Mirae Asset, Hana, Samsung, DB, Daishin, &amp; Hi</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Underwriting type"}'>- Underwriting type</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Standby"}'>Standby</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><div class="content-highlight"><p>The tentative issuance price of ₩6,950 was calculated based on this formula: Average [1M VWAP, 1W VWAP, 1D Close], as of September 9, 2021.</p></div><h2>Allocation</h2><p>Currently, the number of issued common stock is 79.5 million. So the capital increase rate is a whopping 144.75%, and the dilution per share is 59.14%. Since 20% is allocated to the ESOP, the allocation ratio to stockholders is <strong>1.1589273</strong>.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Allocation"}'>Allocation</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offer volume"}'><strong>Offering volume</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":115107913}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]"><strong>115,107,913</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase"}'>Capital increase</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.447498858082393}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-4]C[0]/R[-7]C[0]">144.75%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5914196255096533}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-5]C[0]/(R[-8]C[0]+R[-5]C[0])">59.14%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares after rights offer"}'>Total shares after rights offer</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":194629850}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">194,629,850</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP allocation"}'>ESOP allocation</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":23021582}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>23,021,582</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.19999999478749997}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-17]C[0]">20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder allocation"}'><strong>Stockholder allocation</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":92086331}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-18]C[0]-R[-2]C[0]"><strong>92,086,331</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'><strong>- %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8000000052125}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-19]C[0]"><strong>80.00%</strong></td>
</tr>
<tr>
<td><strong>Per-share allocation</strong></td>
<td style="text-align: right;"><strong>1.1589273</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Schedule</h2><div>
<p>This event's schedule has pretty much nothing unusual, except for the addition of the short-selling ban period. Oh, there is one more thing. This event takes an unusually long time. We have like one and half months gap from now to the first round pricing. It is probably to avoid schedule conflict with another major rights offering, Samsung Heavy Industries, whose payment date falls on November 5th.</p>
<p>So, Doosan Infracore's first-round pricing will be November 11. And ex-rights are on November 3rd, with the subscription rights trading period falling on November 24~30. The issuer will confirm the final price on December 6th, and the listing date is December 28th.</p>
</div><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</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":"Preliminary pricing"}'><strong>Preliminary pricing</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44501}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 01</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights date"}'><strong>Ex-rights date</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44503}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 03</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date"}'>Record date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44504}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 11. 04</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade beginning"}'><strong>Subscription rights trade beginning</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44524}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 24</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade ending"}'><strong>Subscription rights trade ending</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44530}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 30</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final pricing"}'><strong>Final pricing</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44536}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 12. 06</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder subscription"}'>Stockholder subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44538}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 12. 08</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Public subscription"}'>Public subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44540}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 12. 10</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44546}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 12. 16</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44558}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 12. 28</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Short restriction begins"}'><strong>Short restriction begins</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44452}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 09. 13</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Short restriction ends"}'><strong>Short restriction ends</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44533}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 12. 03</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'><p>Source: DART</p></td></tr>
</tbody>
</table><p>The short-selling ban period is from September 13 to December 3rd. Investors who short-sell during this period cannot participate in this capital increase unless they purchase the same quantity they shorted within this period.</p><div class="content-highlight"><p>There seems to be a lot of confusion about this. According to the official documents of the FSC, it is not that only the quantity sold short during the short-selling ban period cannot participate in the rights issue. If we short-sell even one share during this period, we will be completely banned from participating in the rights issue. Then, the only exception is to buy more than the number of stocks short-sold during this period.</p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/161/original/Screen+Shot+2021-09-10+at+11.09.54+AM.png?1631287116" class="editor-image img-responsive" data-smartkarma-image-id="229161"></figure></section><h2>Pricing</h2><p>The procedure for determining the offering price is as follows, again nothing unusual here. The discount rate of this event is 20%, which is the usual discount rate for local rights offerings. Just, this is a bit less aggressive than the 15% discount rate of Samsung Heavy Industries announced last month. Given the current market liquidity, it seems to me that Doosan Infracore could have gone for a little more aggressive discount, say 15%.</p><table class="table table-striped">
<colgroup>
<col width="400">
<col width="400">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1st round"}'><strong>1st round</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"RP × (1 - 20%) / [1 + (144.75% × 20%)]"}' data-sheets-formula='="RP × (1 - "&amp;(R[11]C[0]*100&amp;"%")&amp;") / [1 + ("&amp;(R[12]C[0]*100&amp;"%"&amp;" × "&amp;(R[11]C[0]*100&amp;"%"&amp;")]"))'><strong>RP × (1 - 20%) / [1 + (144.75% × 20%)]</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'><strong>- Reference price (RP)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]"}'><strong>Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'><strong>- Reference date</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44501}' data-sheets-numberformat='[null,5,"yyyy\". \"mm\". \"dd",1]' data-sheets-formula="=Terms!R[41]C[0]"><strong>2021. 11. 01</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights base price"}'>Ex-rights base price</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"[RP + (1st × 144.75%)] / (1 + 144.75%)"}' data-sheets-formula='="[RP + (1st × "&amp;R[9]C[0]*100&amp;"%"&amp;")] / (1 + "&amp;R[9]C[0]*100&amp;"%"&amp;")"'>[RP + (1st × 144.75%)] / (1 + 144.75%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Previous close"}'>Previous close</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44503}' data-sheets-numberformat='[null,5,"yyyy\". \"mm\". \"dd",1]' data-sheets-formula="=Terms!R[39]C[0]">2021. 11. 03</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2nd round"}'><strong>2nd round</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"RP × (1 - 20%)"}' data-sheets-formula='="RP × (1 - "&amp;(R[5]C[0]*100&amp;"%")&amp;")"'><strong>RP × (1 - 20%)</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'><strong>- Reference price (RP)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP)]"}'><strong>Min [Close, Avg (Close, 1W VWAP)]</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'><strong>- Reference date</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44536}' data-sheets-numberformat='[null,5,"yyyy\". \"mm\". \"dd",1]' data-sheets-formula="=Terms!R[40]C[0]"><strong>2021. 12. 06</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final"}'>Final</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Max [Min (1st, 2nd), 3D VWAP × 60%]"}'>Max [Min (1st, 2nd), 3D VWAP × 60%]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44536}' data-sheets-numberformat='[null,5,"yyyy\". \"mm\". \"dd",1]' data-sheets-formula="=Terms!R[38]C[0]">2021. 12. 06</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount rate"}'><strong>Discount rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>20.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'><strong>Capital increase rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.4475}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=LEFT(Terms!R[11]C[0],7)*100/100"><strong>144.75%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

OverviewThis is again an offering to the stockholders with forfeited shares going to a public offering. A total of 115 million new shares are issued, and the tentative issuance price is set at ₩6,950. So, the total issuance size is ₩0.8T.





Overview

Target
A public offering of forfeited shares after offering to stockholders


Transferability
Renounceable


Offering volume
115,107,913


Preliminary price
₩6,950


Preliminary value
₩799,999,995,350


Oversubscription privilege
20.00%


Banker
KB, NH, KIS, Mirae Asset, Hana, Samsung, DB, Daishin, &amp; Hi


- Underwriting type
Standby

Source: DART

The tentative issuance price of ₩6,950 was calculated based on this formula: Average [1M VWAP, 1W VWAP, 1D Close], as of September 9, 2021.AllocationCurrently, the number of issued common stock is 79.5 million. So the capital increase rate is a whopping 144.75%, and the dilution per share is 59.14%. Since 20% is allocated to the ESOP, the allocation ratio to stockholders is 1.1589273.





Allocation

Offering volume
115,107,913


Capital increase
144.75%


Dilution
59.14%


Total shares after rights offer
194,629,850


ESOP allocation
23,021,582


- %
20.00%


Stockholder allocation
92,086,331


- %
80.00%


Per-share allocation
1.1589273

Source: DART

Schedule
This event's schedule has pretty much nothing unusual, except for the addition of the short-selling ban period. Oh, there is one more thing. This event takes an unusually long time. We have like one and half months gap from now to the first round pricing. It is probably to avoid schedule conflict with another major rights offering, Samsung Heavy Industries, whose payment date falls on November 5th.
So, Doosan Infracore's first-round pricing will be November 11. And ex-rights are on November 3rd, with the subscription rights trading period falling on November 24~30. The issuer will confirm the final price on December 6th, and the listing date is December 28th.






Schedule

BOD meeting
2021. 09. 10


Preliminary pricing
2021. 11. 01


Ex-rights date
2021. 11. 03


Record date
2021. 11. 04


Subscription rights trade beginning
2021. 11. 24


Subscription rights trade ending
2021. 11. 30


Final pricing
2021. 12. 06


Stockholder subscription
2021. 12. 08


Public subscription
2021. 12. 10


Payment
2021. 12. 16


Listing
2021. 12. 28



Short restriction begins
2021. 09. 13


Short restriction ends
2021. 12. 03

Source: DART

The short-selling ban period is from September 13 to December 3rd. Investors who short-sell during this period cannot participate in this capital increase unless they purchase the same quantity they shorted within this period.There seems to be a lot of confusion about this. According to the official documents of the FSC, it is not that only the quantity sold short during the short-selling ban period cannot participate in the rights issue. If we short-sell even one share during this period, we will be completely banned from participating in the rights issue. Then, the only exception is to buy more than the number of stocks short-sold during this period.PricingThe procedure for determining the offering price is as follows, again nothing unusual here. The discount rate of this event is 20%, which is the usual discount rate for local rights offerings. Just, this is a bit less aggressive than the 15% discount rate of Samsung Heavy Industries announced last month. Given the current market liquidity, it seems to me that Doosan Infracore could have gone for a little more aggressive discount, say 15%.





Pricing

1st round
RP × (1 - 20%) / [1 + (144.75% × 20%)]


- Reference price (RP)
Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]


- Reference date
2021. 11. 01


Ex-rights base price
[RP + (1st × 144.75%)] / (1 + 144.75%)


- Reference price (RP)
Previous close


- Reference date
2021. 11. 03


2nd round
RP × (1 - 20%)


- Reference price (RP)
Min [Close, Avg (Close, 1W VWAP)]


- Reference date
2021. 12. 06


Final
Max [Min (1st, 2nd), 3D VWAP × 60%]


- Reference date
2021. 12. 06


Discount rate
20.00%


Capital increase rate
144.75%

Source: DART



Doosan Infracore Rights Offer Walkthrough & Thoughts on Arb Trading Setups

HD Hyundai Heavy Industries  / Equity Capital Markets

SubscriptionHyundai Heavy Industries fixed the offering price at ₩60,000, the upper end of the indicative price band. As a result, it raises ₩1.08T through this IPO, with a market cap of ₩5.33T. HHI's bookbuilding result far exceeded expectations. I expected it to be successful to some extent, but I didn't know it would elicit such a warm response. With this level of success, we may even aim for KOSPI 200 Fast Entry after listing.As the competition rate for institutional subscriptions recorded 1,471 to 1, it was again close to a historical record. HHI also raised more than ₩56T in the margin in retail subscriptions. This is the largest margin since Kakao Bank's listing.









By investor type
Institution
%
Demand
%


1. Local publicly raised funds
587
35.95%
6,851,608,000
37.70%


2. Local brokerages/investment advisories
40
2.45%
462,405,000
2.54%


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
276
16.90%
3,149,173,000
17.33%


4. Local - Other (discretionary investment companies, mostly local hedge funds)
382
23.39%
4,873,338,000
26.81%


5. Foreign (foreign IPO funds &amp; hedge funds)
132
8.08%
705,850,862
3.88%


6. Foreign - Other (mostly local hot money)
216
13.23%
2,132,703,000
11.73%


Total
1,633
100.00%
18,175,077,862
100.00%


Subscription rate
1,835.87

Source: DART

On average, about half went to the pricing above the upper end (including Unspecified). More importantly, all institutions have virtually written prices above 75% of the upper end. In particular, foreign institutions have made a quite aggressive pricing.








Institution type
Above the upper end + Unspecified
% of total demands
Holding tendencies


1. Local publicly raised funds
52.30%
19.80%
Long-term


2. Local brokerages/investment advisories
30.00%
0.71%
Short-term


3. Local pensions, funds managing proprietary assets, banks, and insurance companies
43.84%
7.71%
Long-term


4. Local - Other (discretionary investment companies, mostly local hedge funds)
38.22%

10.29%
Short-term


5. Foreign (foreign IPO funds &amp; hedge funds)
96.97%
3.81%
Long or short-term, depends


6. Foreign - Other (mostly local hot money)
50.93%
6.24%
Short-term

Source: DART

AllocationSome forfeited shares occurred in the ESOP, which went entirely to retail investors. Institutional allocation stood at 55%. Most of the institutional allocation results were taken by institutions with a long-term holding tendency.









Allocation by type
Initial allocation
% of the total offering
% of post-IPO SO


Institutional
55.00%
55.00%
11.15%


1. Local publicly raised funds
-
19.36%
3.93%


2. Local Br/IA
-
0.58%
0.12%


3. Local pension, etc.
-
13.78%
2.79%


4. Local - Other
-
1.89%
0.38%


5. Foreign
-
19.40%
3.93%


6. Foreign - Other
-
0.00%
0.00%


Retail
25.00%
25.60%
5.19%


ESOP
20.00%
19.40%
3.93%


Total
100.00%
100.00%
20.28%

Source: DART


In particular, a pretty decent institutional composition was created by giving about 35% of the institutional allocation to foreigners. This 35% is not a level that we can see as a significantly higher allocation ratio for foreign investors than in past cases. Nevertheless, this foreign ownership ratio is high enough to stabilize short-term investor sentiment. At the same time, almost no allocation was made to local hot money, which is highly likely to engage in short-term trading.









By investor type
Holding tendencies
Applications
Allocated, % of the offering


Local publicly raised funds
Long-term
37.70%
35.20%


Local brokerages/investment advisories
Short-term
2.54%
1.05%


Local pensions, funds managing proprietary assets, banks, and insurance companies
Long-term (pensions) &amp; short-term (proprietary asset managers)
17.33%
25.05%


Local - Other (mostly discretionary investment companies - local hedge funds))
Mainly, short-term
26.81%
3.43%


Foreign (foreign IPO funds &amp; hedge funds)
Depends
3.88%
35.27%


Foreign - Other (mostly local hot money)
Short-term
11.73%
0.00%

Source: DART




Hyundai Heavy Industries Listing: Allocation, Lockups, & Float Schedule

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

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

<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

South Korea

GS Holdings is a holding company, which operates subsidiaries including GS Caltex Oil, GS Power, GS Home Shopping, GS Retail, and GS Sports.

S-Oil Corporation refines crude oil and sells petroleum and its related products.  The Company mainly focuses on petroleum refining, petrochemical, and lubricant business. S-Oil's major products are gasoline, bunker oil, kerosene, naphtha, lubricants, benzene, toluene, and xylene.

SK Gas Ltd imports, stores, and distributes liquefied petroleum gas (LPG). The Company supplies its products mainly to domestic market for household, the transportation industry, and petrochemical products manufacturers.

SK Innovation Co., Ltd. refines, markets, and distributes oil.  The Company produces a variety of petroleum products, such as gasoline, kerosene, liquefied petroleumgas (LPG), and diesel oil.  SK Energy also manufactures petrochemical p roducts, including paraxylene, synthetic resins, styrene monomer, and ethylene.

Hankook Shell Oil Co., Ltd. manufactures and markets lubricants, grease, and other petroleum products used for cars, vessels, industrial machinery, and cutting tools.  The Company exports its products to Southeast Asian countries, Russia, and China.  Hankook Shell is an affiliate of Royal Dutch Shell Group.

Heunggu Oil Co. Ltd. distributes petroleum products through its network of gasoline and liquefied petroleum gas (LPG) stations.

Mi Chang Oil Industrial Co., Ltd. refines, produces, and distributes lubricants used in industrial machinery, ships, and automobiles.  The Company also produces rubber processing oil for rubber products manufacturing and insulating oil for electrical properties.

JC Chemical Co., Ltd, manufactures biofuels including biodisel and other byproducts derived from bioenergy source.

Keystone Global is in coal business selling its coal to steel producers. The Company also operates smartcard business which offers the smartcard with IC chips embedded.

Joong Ang Enervis Co., Ltd. distributes petroleum products.  The Company operates a network of gasoline and liquefied petroleum gas (LPG) stations. Joong Ang Enervis' products include gasoline, kerosene, lubricating oil, and low sulfur diesel.

Scorpio Tankers Inc. operates as a shipping company. The Company provides seaborne transportation of crude oil and other petroleum products. Scorpio Tankers serves customers worldwide.

Golar LNG Limited is an independent owner and operator of liquefied Natural Gas (LNG) infrastructure including carriers, Floating Storage and Regasification Units (FSRUs) and Floating Liquefaction (FLNG) vessels.  Collectively these assets make Golar an integrated midstream LNG services provider supporting resource holders, gas producers and consumers.

Northern Oil and Gas, Inc. is an oil and gas exploration and production company. The Company produces petroleum products. Northern Oil and Gas is currently focused on the Rocky Mountain regions of the United States.

PBF Energy Inc. is an independent petroleum refiner and supplier. The Company offers unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. PBF's finished products are sold through long-term offtake and supply agreements.

California Resources Corporation is an independent oil and natural gas company. The Company focuses on maximizing the value of land, mineral and technical resources for decarbonization by developing carbon capture and storage and other emissions reducing projects. California Resources serves customers in the State of California.

CNX Resources Corporation operates as a natural gas exploration and production company. The Company owns gas reserves that develop and produce natural gas, including methane and shale beds. CNX Resources serves natural gas industry in the United States.

Petronas Dagangan Berhad markets petroleum products and operates service stations domestically. Through its subsidiaries, the Company has operations in aviation fueling at Kuala Lumpur International Airport and bunkering facilities at West Port along with marketing and distributing lubricants.

Pingdingshan Tianan Coal Mining Co., Ltd. operates underground coal mining, coal washing and processing. The company also provides ground transportation services.

Yangquan Coal Industry Group Co Ltd. produces, processes, and sells coal. The Company also generates electricity and heat. Yangquan Coal sells its products domestically and exports to other countries.

Mangalore Refinery and Petrochemicals Limited refines oil and produces petroleum and petrochemicals. The Company is a subsidiary of ONGC. Mangalore Refinery operates a refinery in Mangalore city that produces premium diesel and unleaded petrol of high octane.

Mangalore Refinery and Petrochemicals Limited (MRPL IN)

Mangalore Refinery and Petrochemicals Limited

HD Hyundai Co.,Ltd. operates as a oil refining company. The Company provides crude oil refining, petroleum refinery, and other related products. HD Hyundai markets its products worldwide.

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HD Hyundai (267250 KS)

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