Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Doosan Bobcat Inc / Equity Capital Markets

This is Part I of our in-depth analysis of Doosan Bobcat IPO. Our Part I report has three major sections, including a) comparable companies valuation/margins analysis, b) an explanation of a potential cyclical downturn in the US housing market, and c) a financial analysis of the company. <a href="https://www.smartkarma.com/entities/23592" target="_blank" data-smartkarma-citation="entities:23592:1">Doosan Bobcat Inc. (1253130D KS)</a>, which was established on April 25th, 2014, manufactures compact construction equipment including skid-steer loaders, compact track loaders, mini-excavators, and generators.Our initial valuation analysis suggests that the intrinsic value of Doosan Bobcat shares are about 8-22% lower than the low-end IPO valuation range of 4.1 trillion won (US$3.7 billion) which would be about 3.2 trillion won (US$2.95 billion) to 3.77 trillion won (US$3.4 billion).

This is Part I of our in-depth analysis of Doosan Bobcat IPO. Our Part I report has three major sections, including a) comparable companies valuation/margins analysis, b) an explanation of a potential cyclical downturn in the US housing market, and c) a financial analysis of the company. Doosan Bobcat Inc. (1253130D KS), which was established on April 25th, 2014, manufactures compact construction equipment including skid-steer loaders, compact track loaders, mini-excavators, and generators.Our initial valuation analysis suggests that the intrinsic value of Doosan Bobcat shares are about 8-22% lower than the low-end IPO valuation range of 4.1 trillion won (US$3.7 billion) which would be about 3.2 trillion won (US$2.95 billion) to 3.77 trillion won (US$3.4 billion). 

Doosan Bobcat IPO (Part 1) - Beware of High Valuation & A Cyclical Downturn

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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Doosan Bobcat will do an IR (NDR) meeting from Sep 26 to Oct 7. The company will then conduct a demand survey from Oct 6 to 7. The company set its desired IPO price band at ₩41,000-50,000. How would the institutional investors respond to this price band in this demand survey?<table class="table table-striped"><tbody>
<tr>
<td>Sep 26 to Oct 7</td>
<td>IPO IR meeting</td>
</tr>
<tr>
<td>Oct 6 to 7</td>
<td>Demand survey</td>
</tr>
<tr>
<td>Oct 12 to 13</td>
<td>Subscription period</td>
</tr>
<tr>
<td>Oct 17</td>
<td>Allotment &amp; payment</td>
</tr>
<tr>
<td>Oct 21</td>
<td>IPO listing</td>
</tr>
</tbody></table>According to Doosan Bobcat's registration statement, Doosan Bobcat's valuation calculation is quite…

Doosan Bobcat will do an IR (NDR) meeting from Sep 26 to Oct 7. The company will then conduct a demand survey from Oct 6 to 7. The company set its desired IPO price band at ₩41,000-50,000. How would the institutional investors respond to this price band in this demand survey?

Sep 26 to Oct 7
IPO IR meeting


Oct 6 to 7
Demand survey


Oct 12 to 13
Subscription period


Oct 17
Allotment &amp; payment


Oct 21
IPO listing

According to Doosan Bobcat's registration statement, Doosan Bobcat's valuation calculation is quite…

Doosan Bobcat is a holding company for a total of 31 subsidiaries in 20 countries. The company is a manufacturer of farm and construction equipment. Doosan Bobcat's 1H16 sales were US$1.82bil with operating profits of US$198.6mil, down 1.1% YoY and 2.3% YoY, respectively. However, the company has continued to maintain an OPM at about 10%. As of 1H16, Bobcat's debt ratio is 95.0%.Doosan Bobcat's US$3.7-4.5bil (₩4.1-5.0tril) valuation does not really seem to be a total nonsense. This is about 1 to 1.3 times sales and 11 to 13 times OP. Yes, this is not a high-flying tech company. This is a construction equipment manufacturer. We cannot really expect a fancy growth rate. Nonetheless, if we look at how Bobcat's peers are currently valued in the market, Bobcat seems to have a good shot to achieve its target IPO price range. The company has continued to capitalize on the strong US construction market in recent years, so did its peers whose stock prices have been strong as well.Well, Bobcat's management (Doosan Group) factor remains to be seen. That is, we are not sure whether Doosan Group management would serve as a premium or discount factor. Nonetheless, Doosan Infracore seems to be regaining its strength on China's rebounding construction market. So, the expectations on possible synergies with Doosan's affiliates would possibly create a higher valuation premium for Bobcat.

Doosan Bobcat is a holding company for a total of 31 subsidiaries in 20 countries. The company is a manufacturer of farm and construction equipment. Doosan Bobcat's 1H16 sales were US$1.82bil with operating profits of US$198.6mil, down 1.1% YoY and 2.3% YoY, respectively. However, the company has continued to maintain an OPM at about 10%. As of 1H16, Bobcat's debt ratio is 95.0%.Doosan Bobcat's US$3.7-4.5bil (₩4.1-5.0tril) valuation does not really seem to be a total nonsense. This is about 1 to 1.3 times sales and 11 to 13 times OP. Yes, this is not a high-flying tech company. This is a construction equipment manufacturer. We cannot really expect a fancy growth rate. Nonetheless, if we look at how Bobcat's peers are currently valued in the market, Bobcat seems to have a good shot to achieve its target IPO price range. The company has continued to capitalize on the strong US construction market in recent years, so did its peers whose stock prices have been strong as well.Well, Bobcat's management (Doosan Group) factor remains to be seen. That is, we are not sure whether Doosan Group management would serve as a premium or discount factor. Nonetheless, Doosan Infracore seems to be regaining its strength on China's rebounding construction market. So, the expectations on possible synergies with Doosan's affiliates would possibly create a higher valuation premium for Bobcat.

Doosan Bobcat, Doosan Infracore (042670)'s subsidiary (Doosan Infracore owns 66.56% and Doosan Engine (082740) owns 11.84%), has received preliminary approval for its IPO scheduled for October this year. Doosan Bobcat is one of the leaders in the small construction machinery market. In particular, it has a strong business presence in the US.Today (actually just hours ago), Doosan Bobcat’s owners announced their valuation of its stakes in Doosan Bobcat. They are now aiming to raise as much as…

Doosan Bobcat, Doosan Infracore (042670)'s subsidiary (Doosan Infracore owns 66.56% and Doosan Engine (082740) owns 11.84%), has received preliminary approval for its IPO scheduled for October this year. Doosan Bobcat is one of the leaders in the small construction machinery market. In particular, it has a strong business presence in the US.Today (actually just hours ago), Doosan Bobcat’s owners announced their valuation of its stakes in Doosan Bobcat. They are now aiming to raise as much as…

Equity Research Analyst, Maritime sector, Drewry Maritime Financial Research

Ankush Kathuria CFA, FRM

Equity Research Analyst, Maritime sector

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

Thematic (Sector/Industry)

<blockquote>
“Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.”
―Nassim Nicholas Taleb, Ten principles for a Black Swan-proof world (2009)
</blockquote>This morning, Hanjin Shipping Co. said it will apply for court receivership after lenders decided to halt all support. We have been highlighting these risks from 2013 and in our last update on troubled container shipping company, we had highlighted the…


“Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.”
―Nassim Nicholas Taleb, Ten principles for a Black Swan-proof world (2009)
This morning, Hanjin Shipping Co. said it will apply for court receivership after lenders decided to halt all support. We have been highlighting these risks from 2013 and in our last update on troubled container shipping company, we had highlighted the…

Hanjin Shipping(117930 KS) - Borrowed Time Comes to an End

South Korea

Hyundai Elevator Co., Ltd. (HELCO) manufactures, installs, sells, and services elevators, escalators, moving walkways, automated parking systems, and material handling systems.  The Company also produces screen doors used on platforms in train stations.

HSD Engine Co., Ltd. is an integrated engine manufacturer specializing in producing diesel engine for large vessels. The Company provides business in diesel power plant construction and operation, engine parts sales, and engine maintenance and repair services.

People and Technology INC is a company manufacturing in Secondary Battery and Semiconductors.

STX Heavy Industries Co., Ltd. manufactures diesel engine components for ships. The Company's products include crank shafts, cylinder liners, turbo chargers, and cargo pumps.

Dawonsys Co., LTD. operates special power generating business such as Nuclear Fusion, Inductiral Electric and Plasma Power business. The Company also operates Inductive Heating and ESD Polyimide Film Business.

Sejin Heavy Industries Co. Ltd., operates a shipbuilding firm.  The Company manufactures ship components such as Deck House and Liquified Petroleum Gas (LPG) Tank.

Sejin Heavy Industries Co Ltd (075580 KS)

STX Engine Co., Ltd. develops and manufactures marine diesel engine and military engine.  The Company also manufactures electronic communication equipment.

Taewoong Co., Ltd. manufactures forged products required for heavy industry, such as shipbuilding, petrochemical plant use, and industrial machinery use. The Company's products include flanges, tube sheets, rings, shafts, and piston rods.

Hy-Lok Corporation develops, manufactures, and markets precision fittings and valves used in the petrochemical, semiconductor, and power generation industries.  The Company's products include needle valves, manifolds and gauge valves, filters, tube fittings, and pipe fittings.  In addition, Hy-Lok produces parts and components used in the plumbing market.

TK Corp. manufactures and markets piping materials used in the petrochemical, and shipbuilding industries.  The Company's products include pipe reducers, elbow tee reducers, and steel flanges.  TK also produces fittings and valves for semiconductors.

TADANO LTD. manufactures and sells various types of hydraulic cranes for construction and other industrial use.  The Company, through utilizing its own mechatronics technology, develops truck, all-terrain, and cargo cranes as well as non-crane equipment such as aerial platform trucks and lighting vehicles. The Company also manufactures pneumatic devices.

TriMas Corporation is a diversified manufacturer of proprietary products. The Company manufactures trailer products, recreational accessories, packaging systems, energy products and industrial specialty products for the commercial, manufacturing, and consumer markets.

Mitsui E&S Holdings Co., Ltd. engineers, builds, and repairs ships.  The Company also manufactures industrial machinery and equipment and builds power plants.  Mitsui Engineering & Shipbuilding also operates information systems services and real estate business.

Yunnan Xiyi Industry Co Ltd develops, manufactures and distributes connecting rods for automobile engines and other automobile parts including castings and forge pieces.

NTN CORPORATION manufactures a variety of bearings and machinery parts for industrial use.  The Company's products include bearings for office automation equipment, bearings, hubs, and joints for automobile engines, drive-train, suspension, and transmissions, clutch-related products, and precision machinery. NTN has sales networks in Japan and overseas.

Wabash National Corporation manufactures semi trailers in North America. The company specializes in the design and production of dry freight vans, refrigerated vans, flatbed trailers, drop deck trailers, dump trailers, truck bodies and intermodal equipment.

Makino Milling Machine Co., Ltd. manufactures, sells, and repairs machining centers (MCs), electrical dischargers, numerical control (NC) milling machines, and other related industrial machinery.  The Company also produces die/mold manufacturing systems as well as Computer Aided Manufacturing (CAM) and Computer Aided Design (CAD) systems software to support its machine tools.

Namura Shipbuilding Co., Ltd. is a manufacturer of cargo vessels, tankers, and steel structures such as bridges and floodgates.  The Company also leases, repairs, and provides maintenance services.  As a group, Namura Shipbuilding operates a variety of businesses including software development, information systems sales, precision coil manufacturing, and catering and security services.

Shuangliang Eco-Energy Systems Company Ltd. manufactures air conditioning products.  The Company produces flue gas lithium bromide absorption chillers, lithium bromide heat pump chillers, silicon gel absorption chillers, heat exchangers, and direct air cooled condensers.  Shuangliang Eco-Energy also manufactures sea water desalination equipment.

Shuangliang Eco Energy Systems (600481 CH)

Qinchuan Machine Tool & Tool Group Co. Ltd. manufactures and distributes numerical control machine tools and complex cutting tools. The Company produces cylindrical grinders, gear grinding machines, gear cutting tools, thread cutters, and measuring equipment. Qinchuan Machine Tool & Tool Group markets its products worldwide.

Qinchuan Mchn Tool & Tool Gp Shre (000837 CH)

Hyundai Doosan Infracore Co., Ltd. produces construction machinery. The Company manufactures construction equipment, industrial vehicles, diesel engines, power generators, machine tools, factory automation system, and other products, such as armored vehicles for the defense industry. Hyundai Doosan Infracore markets its products worldwide.

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HD Hyundai Infracore (042670 KS)

Doosan Bobcat IPO (Part 1) - Beware of High Valuation & A Cyclical Downturn

This is Part I of our in-depth analysis of Doosan Bobcat IPO. Our Part I report has three major sections, including a) comparable companies...

Douglas Kim

Doosan Bobcat IPO Valuation

Doosan Bobcat will do an IR (NDR) meeting from Sep 26 to Oct 7. The company will then conduct a demand survey from Oct 6 to 7. The company set its...

Sanghyun Park

Doosan Bobcat IPO Analysis

Doosan Bobcat is a holding company for a total of 31 subsidiaries in 20 countries. The company is a manufacturer of farm and construction...

Sanghyun Park

Doosan Bobcat IPO Preview

Doosan Bobcat, Doosan Infracore (042670)'s subsidiary (Doosan Infracore owns 66.56% and Doosan Engine (082740) owns 11.84%), has received...

Sanghyun Park

Hanjin Shipping(117930 KS) - Borrowed Time Comes to an End

“Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a...

Drewry Maritime Financial Research

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