Research from Asian Century Stocks, Asian Century Stocks

Michael Fritzell

Research from Asian Century Stocks

Providing financial journalism in the Asia-Pacific

Asian Century Stocks

Asian Century Stocks is a newsletter providing financial journalism for companies and stocks in the Asia-Pacific. 
The Asian Century Stocks logotype “百” stands for “one hundred” or a “century”. The economic centre of gravity is moving towards Asia. Yet most global investors are missing out.

Equity Bottom-Up

<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/158/original/1.png?1624239576" class="editor-image img-responsive" data-smartkarma-image-id="214158"></figure>
</section>
<p>I just read the book <a href="https://www.amazon.com/Samsung-Rising-Inside-Korean-Conquer-ebook/dp/B07T9WTTZC/ref=sr_1_1?dchild=1&amp;keywords=samsung+rising&amp;qid=1623743594&amp;sr=8-1" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.amazon.com/Samsung-Rising-Inside-Korean-Conquer-ebook/dp/B07T9WTTZC/ref%3Dsr_1_1?dchild%3D1%26keywords%3Dsamsung%2Brising%26qid%3D1623743594%26sr%3D8-1&amp;source=gmail&amp;ust=1624323969123000&amp;usg=AFQjCNGC2aiiwDMsNjEfaxR0gESTgnBzqg" rel="noopener">Samsung Rising</a> by Geoffrey Cain and found it enlightening.</p>
<p>Samsung is a unique company: one of the best brand names to ever come out of East Asia.</p>
<p>This post will give you a brief history of how Samsung made the journey from a post-war trading company to an international technology giant. I will then describe where Samsung is today and where it could be heading in the future.</p>




I just read the book Samsung Rising by Geoffrey Cain and found it enlightening.
Samsung is a unique company: one of the best brand names to ever come out of East Asia.
This post will give you a brief history of how Samsung made the journey from a post-war trading company to an international technology giant. I will then describe where Samsung is today and where it could be heading in the future.

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

<p>Samsung Heavy Industries began the day with a gap down at -20.95%. But it manages to climb back up to -10.33%. Now it is settling at -16.20% as I'm writing this post. Yes, the trading volume exploded as expected. It is now 5.24 times its 30-day average daily trading volume, representing 11.56% of the total shares. Today's price range also soared to 14.13%p, nearly 4 times the usual range of 3.8%p.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Samsung Heavy Industries Co.,Ltd"}' data-sheets-formula='=googlefinance(R[1]C[1], "name")'>Samsung Heavy Industries Co., Ltd</td></tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"MC (₩B)"}'>Current market cap</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":3780}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula='=googlefinance(R[-1]C[0], "price")*googlefinance(R[-1]C[0], "shares")/1000000000'>₩3,780.0B</td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"x DTV"}'><strong>Today trading volume so far as a % of 30-day average daily trading volume</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":5.239735194175107}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula='=googlefinance(R[-3]C[0], "volume")/googlefinance(R[-3]C[0], "volumeavg")'><strong>5.24x</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"TV/SO"}'><strong>Today trading volume so far as a % of shares outstanding</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":0.11557541746031746}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula='=googlefinance(R[-5]C[0], "volume")/googlefinance(R[-5]C[0], "shares")'><strong>11.56%</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"Close"}'>Current price</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":6000}' data-sheets-numberformat='[null,4,"[$₩-412]#,##0"]' data-sheets-formula='=googlefinance(R[-6]C[0], "price")'>₩6,000</td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"Δ Daily"}'><strong>Δ Daily</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":-0.16201117318435754}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R8C2-R[2]C[1])/R[2]C[1]"><strong>-16.20%</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"Gap"}'><strong>Gap</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":-0.20949720670391062}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-2]C[1]-R[1]C[1])/R[1]C[1]"><strong>-20.95%</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"x Open"}'><strong>Today's high - low as a %point</strong></td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":0.1413427561837456}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-2]C[1]-R[-1]C[1])/R[-3]C[1]"><strong>14.13%p</strong></td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"U Wick"}'>Today's upper wick</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":-0.525}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=if((R[-5]C[0]-R[-5]C[1])&gt;0, (R[-5]C[0]-R[-4]C[1])/(R9C[1]-R[-3]C[1]), (R[-5]C[1]-R[-4]C[1])/(R9C[1]-R[-3]C[1]))">-52.50%</td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"Body"}'>Today's body</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":0.425}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-6]C[0]-R[-6]C[1])/(R9C[1]-R[-4]C[1])">42.50%</td>
</tr>
<tr>
<td style="width: 420.909px;" data-sheets-value='{"1":2,"2":"D Wick"}'>Today's lower wick</td>
<td style="text-align: right; width: 281.818px;" data-sheets-value='{"1":3,"3":0.05}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=if((R[-7]C[0]-R[-7]C[1])&gt;0, (R[-7]C[1]-R[-5]C[1])/(R9C[1]-R[-5]C[1]), (R[-7]C[0]-R[-5]C[1])/(R9C[1]-R[-5]C[1]))">5.00%</td>
</tr>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>The share price is plummeting today, bringing down the 20-day price gain to -20.63%. But it is still at a flat level on a 120-day span. The 180-day price gain is still 6.01%.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/204/590/original/chart.png?1620278461" class="editor-image img-responsive" data-smartkarma-image-id="204590"></figure></section>

Samsung Heavy Industries began the day with a gap down at -20.95%. But it manages to climb back up to -10.33%. Now it is settling at -16.20% as I'm writing this post. Yes, the trading volume exploded as expected. It is now 5.24 times its 30-day average daily trading volume, representing 11.56% of the total shares. Today's price range also soared to 14.13%p, nearly 4 times the usual range of 3.8%p.





Samsung Heavy Industries Co., Ltd

Current market cap
₩3,780.0B


Today trading volume so far as a % of 30-day average daily trading volume
5.24x


Today trading volume so far as a % of shares outstanding
11.56%


Current price
₩6,000


Δ Daily
-16.20%


Gap
-20.95%


Today's high - low as a %point
14.13%p


Today's upper wick
-52.50%


Today's body
42.50%


Today's lower wick
5.00%

Source: KRX

The share price is plummeting today, bringing down the 20-day price gain to -20.63%. But it is still at a flat level on a 120-day span. The 180-day price gain is still 6.01%.

Samsung Heavy Situation: Discussing 3 Key Issues at This Point

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<p>Short selling has finally resumed in Korea and it has been a busy couple of days on that front with foreign investors piling into stocks that have run up more than their peers over the last year and are potentially overvalued.</p><p>Long/short pairs could be implemented in Korea during the short sell ban if you had long inventory or if there were listed single stock futures on the short leg.</p><p>With short selling permitted on constituents of the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a>, we take a look at long/short pairs where both stocks are members of the index. These pairs belong to the same GICS sub-industry, are correlated and exhibit mean-reversion. We also use short sale data from the last couple of trading sessions to see which stocks are being targeted by short sellers.</p>

Short selling has finally resumed in Korea and it has been a busy couple of days on that front with foreign investors piling into stocks that have run up more than their peers over the last year and are potentially overvalued.Long/short pairs could be implemented in Korea during the short sell ban if you had long inventory or if there were listed single stock futures on the short leg.With short selling permitted on constituents of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX), we take a look at long/short pairs where both stocks are members of the index. These pairs belong to the same GICS sub-industry, are correlated and exhibit mean-reversion. We also use short sale data from the last couple of trading sessions to see which stocks are being targeted by short sellers.

Korea Pair Trades: High Risk/Reward Names with Short Sell Screen

<p>Samsung Heavy Industries first announced a 5 to 1 capital reduction. But this one is a par-value capital reduction without any refund. So, the number of outstanding shares remains unchanged. Only the par-value will be down from ₩5,000 to ₩1,000.</p><p>Why doing it now? Well, it had to do it a long time ago. It has already been a while since Samsung Heavy began to run the risk of encountering capital impairment.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Capital reduction "}'>Capital reduction details</td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":2,"2":"Current"}'>Current</td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":2,"2":"After capital reduction"}'>After capital reduction</td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Ordinary shares"}'><strong>Ordinary shares</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":630000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>630,000,000</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":630000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>630,000,000</strong></td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Par value"}'><strong>Par value</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":5000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'><strong>₩5,000</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":1000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'><strong>₩1,000</strong></td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Capital"}'><strong>Capital</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":3150.574225}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=R[2]C[-3]/1000000000"><strong>3,150.6</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":630.114845}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=R[2]C[-3]/1000000000"><strong>630.1</strong></td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Record date"}'>Record date</td>
<td colspan="2" style="text-align: right; width: 475.455px;" data-sheets-value='{"1":3,"3":44403}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 07. 26</td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Shareholder meeting"}'>Shareholder meeting</td>
<td colspan="2" style="text-align: right; width: 475.455px;" data-sheets-value='{"1":3,"3":44369}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 06. 22</td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Trade suspension"}'><strong>Trade suspension</strong></td>
<td colspan="2" style="text-align: right; width: 475.455px;" data-sheets-value='{"1":2,"2":"2021. 07. 23 ~ 08. 09"}'><strong>2021. 07. 23 ~ 08. 09</strong></td>
</tr>
<tr><td colspan="3" style="width: 723.636px;">Source: DART</td></tr>
</tbody>
</table><hr><p><strong>What's really important is what follows this capital reduction. </strong><strong>Samsung Heavy also made a preannouncement of a ₩1T new share issuance.</strong></p><p>Samsung Heavy will have a shareholder meeting on June 22 to increase the total allowable shares to be issued. A ₩1T new share issuance would see a 22% capital increase at the last close, requiring an increase in the total allowable shares to be issued. This needs shareholder approval. So, we will see the final fixation of offering details after June 22. A new share issuance itself requires only board approval.</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":"Share structure"}'>Share structure</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary shares</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Preferred"}'>Preferred shares</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total allowable shares to be issued"}'><strong>Total allowable shares to be issued</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":740000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>740,000,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":60000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>60,000,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares outstanding"}'><strong>Shares outstanding</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":630000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>630,000,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":114845}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>114,845</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":25964429}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>25,964,429</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Float shares"}'>Float shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":604035571}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>604,035,571</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":114845}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>114,845</td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>What's unusual is the preannouncement. Why preannounces it for an offering taking place more than a month later? Of course, it is not like we've never seen it before. Hyundai Heavy Industries Intermediate Holdco (now Korea Shipbuilding &amp; Offshore Engn Co Ltd) made a preannouncement of rights offering back in 2019. But that was part of a group-wide complex restructuring process, which should have been made public in advance.</p><p>This is a stand-alone offering event. I don't really see why Samsung Heavy should disclose it in advance through a preannouncement.</p><p>My suspicion? I think it is related to the recently enacted short-selling restriction to close the loophole for arb trading in a rights offer. Those having shorted between a day after an offering announcement day and an offering price-fixing day face the restriction. In such a case, they are prevented from participating in an offering at all. The restrictions apply to offering events whose filing dates are after April 6, 2021.</p><div>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Country"}'>Restriction detail</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target"}'><strong>Target</strong></td>
<td data-sheets-value='{"1":2,"2":"Those having shorted between an offering announcement day+1D and an offering price fixing day"}'><strong>Those having shorted between the trading day following an offering announcement day and an offering price-fixing day</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Restriction"}'><strong>Restriction</strong></td>
<td data-sheets-value='{"1":2,"2":"Prohibits participating in an offering"}'><strong>Prohibits participating in an offering</strong></td>
</tr>
<tr>
<td>Effective date</td>
<td>April 6, 2021</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: Korea FSC"}'>Source: Korea FSC</td></tr>
</tbody>
</table>
<p>Then, the question is whether this preannouncement qualifies as an offering announcement subject to the short-selling restrictions. I don't think it is since the Korea FSC states that an offering announcement contains a detailed schedule. This preannouncement has only an estimated offering value.</p>
<p>Samsung Heavy Industries isn't exactly a fancy growth stock. It is evident that liquidity-wise, this offering needs as many arb traders as possible. So, the company may have figured a way to walk around the short-selling restrictions so that it could invite more arb traders. It is like giving more than plenty of time (6 weeks) to short before an offering announcement and recover at a deep discount in an offering.</p>
</div>

Samsung Heavy Industries first announced a 5 to 1 capital reduction. But this one is a par-value capital reduction without any refund. So, the number of outstanding shares remains unchanged. Only the par-value will be down from ₩5,000 to ₩1,000.Why doing it now? Well, it had to do it a long time ago. It has already been a while since Samsung Heavy began to run the risk of encountering capital impairment.







Capital reduction details
Current
After capital reduction


Ordinary shares
630,000,000
630,000,000


Par value
₩5,000
₩1,000


Capital
3,150.6
630.1


Record date
2021. 07. 26


Shareholder meeting
2021. 06. 22


Trade suspension
2021. 07. 23 ~ 08. 09

Source: DART

What's really important is what follows this capital reduction. Samsung Heavy also made a preannouncement of a ₩1T new share issuance.Samsung Heavy will have a shareholder meeting on June 22 to increase the total allowable shares to be issued. A ₩1T new share issuance would see a 22% capital increase at the last close, requiring an increase in the total allowable shares to be issued. This needs shareholder approval. So, we will see the final fixation of offering details after June 22. A new share issuance itself requires only board approval.







Share structure
Ordinary shares
Preferred shares


Total allowable shares to be issued
740,000,000
60,000,000


Shares outstanding
630,000,000
114,845


Treasury shares
25,964,429
-


Float shares
604,035,571
114,845

Source: DART

What's unusual is the preannouncement. Why preannounces it for an offering taking place more than a month later? Of course, it is not like we've never seen it before. Hyundai Heavy Industries Intermediate Holdco (now Korea Shipbuilding &amp; Offshore Engn Co Ltd) made a preannouncement of rights offering back in 2019. But that was part of a group-wide complex restructuring process, which should have been made public in advance.This is a stand-alone offering event. I don't really see why Samsung Heavy should disclose it in advance through a preannouncement.My suspicion? I think it is related to the recently enacted short-selling restriction to close the loophole for arb trading in a rights offer. Those having shorted between a day after an offering announcement day and an offering price-fixing day face the restriction. In such a case, they are prevented from participating in an offering at all. The restrictions apply to offering events whose filing dates are after April 6, 2021.






Restriction detail

Target
Those having shorted between the trading day following an offering announcement day and an offering price-fixing day


Restriction
Prohibits participating in an offering


Effective date
April 6, 2021

Source: Korea FSC


Then, the question is whether this preannouncement qualifies as an offering announcement subject to the short-selling restrictions. I don't think it is since the Korea FSC states that an offering announcement contains a detailed schedule. This preannouncement has only an estimated offering value.
Samsung Heavy Industries isn't exactly a fancy growth stock. It is evident that liquidity-wise, this offering needs as many arb traders as possible. So, the company may have figured a way to walk around the short-selling restrictions so that it could invite more arb traders. It is like giving more than plenty of time (6 weeks) to short before an offering announcement and recover at a deep discount in an offering.


Samsung Heavy's Unusual Preannouncement of Rights Offer: Pave the Path for Massive Arb Trades?

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>After the market close today, <a href="https://www.smartkarma.com/entities/samsung-heavy-industries" target="_blank" data-smartkarma-citation="entities:4:1" rel="noopener">Samsung Heavy Industries (010140 KS)</a> announced that it will conduct a capital reduction plan followed by rights offering issue worth 1 trillion won. The capital reduction will involve a reduction in par value (5 to 1). The rights offering will be worth 1 trillion won, representing 22% of Samsung Heavy Industries (SHI)'s market cap of 4.5 trillion won.</p><p>We believe that this rights offering by Samsung Heavy Industries will act as an overhang on its share price as many investors fear that this offering will lead to further shares dilution. In addition, the company also had an operating loss of 506.8 billion won in 1Q 2021, which was much worse than the consensus estimate of an operating loss of 49.3 billion won in this period.</p><p><strong>Rising materials costs</strong> including steel has resulted in higher than expected total operating costs for Samsung Heavy Industries.</p>

After the market close today, Samsung Heavy Industries (010140 KS) announced that it will conduct a capital reduction plan followed by rights offering issue worth 1 trillion won. The capital reduction will involve a reduction in par value (5 to 1). The rights offering will be worth 1 trillion won, representing 22% of Samsung Heavy Industries (SHI)'s market cap of 4.5 trillion won.We believe that this rights offering by Samsung Heavy Industries will act as an overhang on its share price as many investors fear that this offering will lead to further shares dilution. In addition, the company also had an operating loss of 506.8 billion won in 1Q 2021, which was much worse than the consensus estimate of an operating loss of 49.3 billion won in this period.Rising materials costs including steel has resulted in higher than expected total operating costs for Samsung Heavy Industries.

Samsung Heavy Industries: A Capital Reduction Followed by 1 Trillion Won in Rights Offering

South Korea

Hanwha Ocean Co., Ltd. operates as a shipbuilding and offshore company. The Company provides floating structure construction, steel wire drying, commercial vessels, specialty vessels, gas carrier, tanker, containership, ro ro, bulk carrier, submarine, warship, auxiliaries, cruise ships, and ferries manufacturing services. Hanwha Ocean also offers onshore plants services.

Hyundai Rotem Company Ltd. manufactures railroad equipment and defense vehicles. The Company produces high-speed trains, light rail vehicles, locomotives, and passenger coaches, main battle tanks, armored recovery vehicles, and related defense equipment. Hyundai Rotem operates worldwide.

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

Bobcat Company specializes in design, manufacture, marketing and distribution of compact equipment for construction, rental, landscaping, agriculture, grounds maintenance, government, utility, industry and mining.

Hyundai Mipo Dockyard Co., Ltd. is shipbuilders in the sectors of medium-sized conventional ships and specialized vessels. The Company constructs and delivers medium-ranged product carriers, chemical tankers, containerships, LPG carriers, pure car truck carriers and others.

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.

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

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.

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.

Seatrium Ltd offers engineering solutions for the offshore, marine, and energy industries. The Company provides rigs and floaters, repairs and upgrades, offshore platforms, and specialized shipbuilding. Seatrium serves customers worldwide.

Yangzijiang Shipbuilding (Holdings) Limited builds a wide range of ships. The Company produces a wide range of commercial vessels, mini bulk carriers, multi-purpose cargo vessels, containerships, chemical tankers, offshore supply vessels, rescue and salvage vessels, and lifting vessels.

AGCO Corporation manufactures and distributes agricultural equipment throughout the world.  The Company sells a range of agricultural equipment and related replacement parts, including tractors, combines, hay tools, sprayers, and forage equipment.  AGCO markets its products under a variety of brand names, including Massey Ferguson, AGCO, Tye, GLEANER, and Hesston.

Kurita Water Industries Ltd. manufactures, sells, and maintains water treatment equipment and systems.  The Company's products include water purification and waste water treatment equipment as well as soil remediation systems.  Kurita also manufactures and sells chemicals for water treatment related to sanitation, air-conditioning, and construction.

Thermax Ltd manufactures equipment and machinery used to both produce and to conserve energy. The Company operates through a number of divisions, including Boilers, Heat Recovery Steam Generators, Water Treatment Plants and Air Pollution Control Equipment. In addition, Thermax  produces steam and gas turbines and diesel gensets through a number of strategic alliances.

EBARA CORPORATION manufactures pneumatic and hydraulic pumps and related equipment.  The Company's products include fuel, oil, water, and firefighting pumps, as well as steam turbines and boilers.  Ebara Corporation also engineers garbage incinerators, smoke desulfurizers, and other products related to environmental technology.

IHI Corporation manufactures heavy machinery. The Company produces aircraft jet engines, rocket propulsion systems, and ships for military and commercial use. Ishikawajima-Harima also constructs petroleum refineries and nuclear power plants.

Watts Water Technologies, Inc. designs, manufactures, and sells a line of products to the water regulation and control markets.  The Company has manufacturing plants and distribution channels in the United States, Canada, and Europe, as well as a joint venture in The People's Republic of China.

Chart Industries, Inc. is a global manufacturer of equipment used in the production, storage, and end-use of hydrocarbon and industrial gases. The Company's products include vacuum-insulated containment vessels, heat exchangers, cold boxes, and other cryogenic components.

RBC Bearings Incorporated designs, manufactures, and markets bearing products. The Company offers precision plain, roller, cam followers, couplings, collars, locking, tool holders, shafts, pins, rods, tubes, and ball bearings. RBC Bearings serves industrial, aerospace, and defense markets worldwide.

Samsung Heavy Industries Co., Ltd. manufactures crude oil tankers, container vessels, bulk carriers, cruisers, and passenger ferries.  The Company also produces steel and bridge structures, and material handling equipment.  In addition, Samsung Heavy Industries provides civil engineering, architectural, and plant construction services.

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