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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

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

Equity Capital Markets

HD Korea Shipbuilding & Offshore Engineering / Equity Capital Markets

HD Korea Shipbuilding & Offshore Engineering

<div><div><h2>Offering size</h2></div></div><div><p>Hyundai Heavy Industries (HHI) offers 18M shares, which account for 25.43% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.</p></div><table class="table table-striped">
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<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Offering size"}'>Offering size</td></tr>
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<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"329180"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[1]C[-2]">329180</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}'>Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}'>KOSPI</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'><strong>Offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8654230}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>18,000,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of SO"}'><strong>- % of pre-IPO SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.25433386315786916}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[5]C[-2]"><strong>25.43%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Institutional allotment"}'><strong>- Institutional allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"55.00~75.00%"}' data-sheets-formula="=Terms!R[5]C[-2]"><strong>55.00~75.00%</strong></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><strong>Who is HHI?</strong></p>
<ul>
<li>HHI is the world's largest shipbuilding company based in Korea. Since its establishment in 1973, it has maintained the No. 1 position in the global shipbuilding market since 1983.</li>
<li>Prior to the establishment of the holding company in 2017, Hyundai Heavy Industries was at the apex of a circular shareholding structure that led to Chung Mong-jun (owner) → Hyundai Heavy Industries → Hyundai Samho Heavy Industries → Hyundai Mipo Dockyard → Hyundai Heavy Industries.</li>
<li>In June 2019, Hyundai Heavy Industries conducted a physical division to take over Daewoo Shipbuilding &amp; Marine Engineering. It was divided into an intermediate holding company, Korea Shipbuilding &amp; Offshore Engineering (KSOE), and an operating company, Hyundai Heavy Industries. For this reason, KSOE currently owns 100% of HHI.</li>
</ul>
</div><div><div><h2>Split</h2></div></div><div>
<p>This IPO is a 100% primary offering. As a result, this offering will see a capital increase rate of 25.43% with a shareholding dilution of 20.28%. This event is free of any additional options: cornerstone, clawback, or greenshoe.</p>
<table class="table table-striped">
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<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Split"}'>Split</td></tr>
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<td data-sheets-value='{"1":2,"2":"Primary %"}'><strong>Primary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[3]C[-2]"><strong>100.00%</strong></td>
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<td data-sheets-value='{"1":2,"2":"Secondary %"}'>Secondary %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[-2]">0.00%</td>
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<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":0.25433386315786916}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[-2]"><strong>25.43%</strong></td>
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<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.20276408907399399}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[-2]">20.28%</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div><div><div></div></div><div>
<div><div><h2>Schedule</h2></div></div>
<div>
<p>The book opens on August 26 (September 2 for local institutions) and runs until September 3. The allotment will be on September 6, finalizing an offering price. The subscription falls on September 7.</p>
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<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
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<td data-sheets-value='{"1":2,"2":"Book open"}'><strong>Book open</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44434}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 08. 26</strong></td>
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<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>
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<td data-sheets-value='{"1":2,"2":"Allotment"}'><strong>Allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44445}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 09. 06</strong></td>
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<td data-sheets-value='{"1":2,"2":"Subscription"}'><strong>Subscription</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44446}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 09. 07</strong></td>
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<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":"-"}'>-</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><div><h2>Pricing</h2></div></div>
<div><p>This IPO also uses PBR. The corporate value was determined after selecting the following five companies (one from Korea and four from China):</p></div>
<div><ol style="list-style-type: decimal;">
<li><a href="https://www.smartkarma.com/entities/daewoo-shipbuilding-marine-engineering" target="_blank" data-smartkarma-citation="entities:12531:1" rel="noopener">Daewoo Shipbuilding &amp; Marine Engineering (042660 KS)</a></li>
<li><a href="https://www.smartkarma.com/entities/china-shipbuilding-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:5789:1" rel="noopener">China Shipbuilding Industry (601989 CH)</a></li>
<li>
<a href="https://www.smartkarma.com/entities/china-cssc-holdings-ltd-a" target="_blank" data-smartkarma-citation="entities:2464:1" rel="noopener">China CSSC Holdings Ltd A (600150 CH)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/yangzijiang-shipbuilding-holdings-limited" target="_blank" data-smartkarma-citation="entities:660:1" rel="noopener">Yangzijiang Shipbuilding (YZJSGD SP)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/cssc-offshore-marine-engg-group-co-ltd" target="_blank" data-smartkarma-citation="entities:5089:1" rel="noopener">Cssc Offshore &amp; Marine Engg Group (317 HK)</a> </li>
</ol></div>
<div>
<p>The <strong>average P/B multiple</strong> of these five valuation peers come at <strong>1.12x</strong> based on their 1Q21 financials.</p>
<table class="table table-striped">
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<td data-sheets-value='{"1":2,"2":"FY2021 1Q based annualized net earnings based P/E"}'>As of FY2021 1Q</td>
<td data-sheets-value='{"1":2,"2":"Note"}'>Note</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"DSME"}'>DSME</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"China Shipbuilding Industry Company Ltd"}'>China Shipbuilding Industry Company Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"China CSSC Holdings Ltd"}'>China CSSC Holdings Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Yangzijiang Shipbuilding Holdings Ltd"}'>Yangzijiang Shipbuilding Holdings Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"CSSC Offshore and Marine Engineering Group Co Ltd"}'>CSSC Offshore and Marine Engineering Group Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity"}'>Equity</td>
<td data-sheets-value='{"1":2,"2":"A"}'>A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3635.589}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩3,635.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15324.249}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩15,324.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9411.029}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩9,411.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6066.149}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩6,066.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3057.162}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩3,057.2B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Non controlling interest"}'>Non-controlling interest</td>
<td data-sheets-value='{"1":2,"2":"B"}'>B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩0.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":157.608}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩157.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1247.454}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩1,247.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.08}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩186.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":550.639}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩550.6B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Applied equity"}'>Applied equity</td>
<td data-sheets-value='{"1":2,"2":"C=A-B"}'>C=A-B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3635.589}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩3,635.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15166.641}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩15,166.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8163.575000000001}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩8,163.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5880.069}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩5,880.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2506.5229999999997}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩2,506.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference market cap"}'>Reference market cap</td>
<td data-sheets-value='{"1":2,"2":"D"}'>D</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3401.114}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩3,401.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15590.917}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩15,590.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11966.681}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩11,966.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4552.47}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩4,552.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3504.253}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩3,504.3B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'><strong>PBR</strong></td>
<td data-sheets-value='{"1":2,"2":"E=D÷C"}'><strong>E=D÷C</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.94}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>0.94x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.03}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>1.03x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.47}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>1.47x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.77}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>0.77x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.4}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>1.40x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average PBR"}'><strong>Average PBR</strong></td>
<td data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
<td colspan="5" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":1.12}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>1.12x</strong></td>
</tr>
<tr><td colspan="7" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<p>The averaged P/B multiple of 1.12x was applied to HHI's equity of ₩5,035.7B from the second quarter of this year. Then, an IPO flow of ₩936.0B (at the lower end of the indicative price band) was added. As a result, we have <strong>a reference market cap of ₩6.58T</strong>, giving <strong>a price per share of ₩74,094</strong>.</p>
</div>
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<tr><td colspan="3" style="width: 719.119px;" data-sheets-value='{"1":2,"2":"P/E valuation"}'>HHI: P/B valuation</td></tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Average PBR"}'>Average PBR</td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":1.12}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-4]C[0]">1.12x</td>
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<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Applied equity"}'><strong>Applied equity</strong></td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"B"}'><strong>B</strong></td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":5035.677}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><strong>₩5,035.7B</strong></td>
</tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"IPO inflow"}'><strong>IPO inflow</strong></td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"C"}'><strong>C</strong></td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":936}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><strong>₩936.0B</strong></td>
</tr>
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<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Reference market cap"}'><strong>Reference market cap</strong></td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"D=(AxB)+C"}'><strong>D=(AxB)+C</strong></td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":6577.587}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><strong>₩6,577.6B</strong></td>
</tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Post-IPO SO"}'>Post-IPO SO</td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"E"}'>E</td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":88773116}' data-sheets-numberformat='[null,2,"#,##0",1]'>88,773,116</td>
</tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Price per share"}'><strong>Price per share</strong></td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"F=D÷E"}'><strong>F=D÷E</strong></td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":74094}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'><strong>₩74,094</strong></td>
</tr>
<tr><td colspan="3" style="width: 719.119px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<p>The <strong>indicative price band</strong> lies between <strong>₩52,000 and ₩60,000</strong>. This is obtained by applying a <strong>discount rate of</strong><strong>19.02% to 29.82%</strong> to the market cap of ₩6.58T calculated through PBR. This much discount gives a <strong>P/B multiple of 0.77x to 0.89x</strong>.</p>
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<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"}'><strong>Price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":52000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩52,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":60000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩60,000</strong></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>
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<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]*R23C3/1000000000">₩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]*R23C3/1000000000">₩5,326.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'><strong>- Discount</strong></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="=(R24C3-R[-4]C[0])/R24C3"><strong>29.82%</strong></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="=(R24C3-R[-4]C[0])/R24C3"><strong>19.02%</strong></td>
</tr>
<tr>
<td><strong>Implied PBR</strong></td>
<td style="text-align: right;"><strong>0.77x</strong></td>
<td style="text-align: right;"><strong>0.89x</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
</div>

Offering sizeHyundai Heavy Industries (HHI) offers 18M shares, which account for 25.43% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.





Offering size

Ticker
329180


Bourse
KOSPI


Offering
18,000,000


- % of pre-IPO SO
25.43%


- Institutional allotment
55.00~75.00%

Source: DART


Who is HHI?

HHI is the world's largest shipbuilding company based in Korea. Since its establishment in 1973, it has maintained the No. 1 position in the global shipbuilding market since 1983.
Prior to the establishment of the holding company in 2017, Hyundai Heavy Industries was at the apex of a circular shareholding structure that led to Chung Mong-jun (owner) → Hyundai Heavy Industries → Hyundai Samho Heavy Industries → Hyundai Mipo Dockyard → Hyundai Heavy Industries.
In June 2019, Hyundai Heavy Industries conducted a physical division to take over Daewoo Shipbuilding &amp; Marine Engineering. It was divided into an intermediate holding company, Korea Shipbuilding &amp; Offshore Engineering (KSOE), and an operating company, Hyundai Heavy Industries. For this reason, KSOE currently owns 100% of HHI.

Split
This IPO is a 100% primary offering. As a result, this offering will see a capital increase rate of 25.43% with a shareholding dilution of 20.28%. This event is free of any additional options: cornerstone, clawback, or greenshoe.






Split

Primary %
100.00%


Secondary %
0.00%


Capital increase rate
25.43%


Dilution
20.28%

Source: DART



Schedule

The book opens on August 26 (September 2 for local institutions) and runs until September 3. The allotment will be on September 6, finalizing an offering price. The subscription falls on September 7.






Schedule

Book open
2021. 08. 26


Book close
2021. 09. 03


Allotment
2021. 09. 06


Subscription
2021. 09. 07


Payment
2021. 09. 10


Listing
-

Source: DART


Pricing
This IPO also uses PBR. The corporate value was determined after selecting the following five companies (one from Korea and four from China):

Daewoo Shipbuilding &amp; Marine Engineering (042660 KS)
China Shipbuilding Industry (601989 CH)

China CSSC Holdings Ltd A (600150 CH) 

Yangzijiang Shipbuilding (YZJSGD SP) 

Cssc Offshore &amp; Marine Engg Group (317 HK) 


The average P/B multiple of these five valuation peers come at 1.12x based on their 1Q21 financials.












As of FY2021 1Q
Note
DSME
China Shipbuilding Industry Company Ltd
China CSSC Holdings Ltd
Yangzijiang Shipbuilding Holdings Ltd
CSSC Offshore and Marine Engineering Group Co Ltd


Equity
A
₩3,635.6B
₩15,324.2B
₩9,411.0B
₩6,066.1B
₩3,057.2B


Non-controlling interest
B
₩0.0B
₩157.6B
₩1,247.5B
₩186.1B
₩550.6B


Applied equity
C=A-B
₩3,635.6B
₩15,166.6B
₩8,163.6B
₩5,880.1B
₩2,506.5B


Reference market cap
D
₩3,401.1B
₩15,590.9B
₩11,966.7B
₩4,552.5B
₩3,504.3B


PBR
E=D÷C
0.94x
1.03x
1.47x
0.77x
1.40x


Average PBR
-
1.12x

Source: DART


The averaged P/B multiple of 1.12x was applied to HHI's equity of ₩5,035.7B from the second quarter of this year. Then, an IPO flow of ₩936.0B (at the lower end of the indicative price band) was added. As a result, we have a reference market cap of ₩6.58T, giving a price per share of ₩74,094.








HHI: P/B valuation

Average PBR
A
1.12x


Applied equity
B
₩5,035.7B


IPO inflow
C
₩936.0B


Reference market cap
D=(AxB)+C
₩6,577.6B


Post-IPO SO
E
88,773,116


Price per share
F=D÷E
₩74,094

Source: DART


The indicative price band lies between ₩52,000 and ₩60,000. This is obtained by applying a discount rate of19.02% to 29.82% to the market cap of ₩6.58T calculated through PBR. This much discount gives a P/B multiple of 0.77x to 0.89x.








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%


Implied PBR
0.77x
0.89x

Source: DART





Hyundai Heavy Industries IPO: Offering Details & Valuation Issues

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

China CSSC Holdings Ltd A / Index Rebalance

<p>Post market close on Friday, the China Securities Index Company announced the changes to the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> that will be effective after the close of trading on 11 December.</p>
<p>There are 26 inclusions and exclusions in the review with an estimated one-way turnover of 3.87%.</p>
<p>The inclusions are <a href="https://www.smartkarma.com/entities/tongfang-guoxin-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:15513:1" rel="noopener">Unigroup Guoxin (002049 CH)</a>, <a href="https://www.smartkarma.com/entities/suzhou-dongshan-precision-a" target="_blank" data-smartkarma-citation="entities:8796:1" rel="noopener">Suzhou Dongshan Precision A (002384 CH)</a>, <a href="https://www.smartkarma.com/entities/wuhan-guide-infrared-co-ltd" target="_blank" data-smartkarma-citation="entities:20330:1" rel="noopener">Wuhan Guide Infrared Co,Ltd. (002414 CH)</a>, <a href="https://www.smartkarma.com/entities/jpmf-guangdong-co-ltd-a" target="_blank" data-smartkarma-citation="entities:19050:1" rel="noopener">Jpmf Guangdong Co Ltd A (002600 CH)</a>, <a href="https://www.smartkarma.com/entities/yunnan-chuangxin-new-material" target="_blank" data-smartkarma-citation="entities:27135:1" rel="noopener">Yunnan Chuangxin New Material (002812 CH)</a>, <a href="https://www.smartkarma.com/entities/asymchem-laboratories-tianjin-co-ltd" target="_blank" data-smartkarma-citation="entities:28265:1" rel="noopener">Asymchem Laboratories (002821 CH)</a>, <a href="https://www.smartkarma.com/entities/jafron-biomedical-co-ltd" target="_blank" data-smartkarma-citation="entities:29575:1" rel="noopener">Jafron Biomedical Co Ltd (300529 CH)</a>, <a href="https://www.smartkarma.com/entities/bgi-genomics-co-ltd" target="_blank" data-smartkarma-citation="entities:25890:1" rel="noopener">Bgi Genomics (300676 CH)</a>, <a href="https://www.smartkarma.com/entities/china-cssc-holdings-ltd-a" target="_blank" data-smartkarma-citation="entities:2464:1" rel="noopener">China Cssc Holdings Ltd A (600150 CH)</a>, <a href="https://www.smartkarma.com/entities/beijing-tiantan-biological-products-corp" target="_blank" data-smartkarma-citation="entities:5190:1" rel="noopener">Beijing Tiantan Biological Products (600161 CH)</a>, <a href="https://www.smartkarma.com/entities/jcet-group-co-ltd" target="_blank" data-smartkarma-citation="entities:8628:1" rel="noopener">JCET Group (600584 CH)</a>, <a href="https://www.smartkarma.com/entities/tsingtao-brewery-co-ltd-a" target="_blank" data-smartkarma-citation="entities:846:1" rel="noopener">Tsingtao Brewery Co Ltd A (600600 CH)</a>, <a href="https://www.smartkarma.com/entities/topchoice-medical-corporation" target="_blank" data-smartkarma-citation="entities:1102:1" rel="noopener">Topchoice Medical (600763 CH)</a>, <a href="https://www.smartkarma.com/entities/shanghai-baosight-software-co" target="_blank" data-smartkarma-citation="entities:28228:1" rel="noopener">Shanghai Baosight Software Co (600845 CH)</a>, <a href="https://www.smartkarma.com/entities/jonjee-high-tech-industrial-and-commercial-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:14622:1" rel="noopener">Jonjee High-Tech Ind.&amp; Com. (600872 CH)</a>, <a href="https://www.smartkarma.com/entities/zhongtai-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:29935:1" rel="noopener">Zhongtai Securities Co Ltd (600918 CH)</a>, <a href="https://www.smartkarma.com/entities/boc-international-china-co-a" target="_blank" data-smartkarma-citation="entities:29972:1" rel="noopener">Boc International China Co-A (601696 CH)</a>, <a href="https://www.smartkarma.com/entities/china-merchants-energy-a" target="_blank" data-smartkarma-citation="entities:14450:1" rel="noopener">China Merchants Energy A (601872 CH)</a>, <a href="https://www.smartkarma.com/entities/nanjing-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:27192:1" rel="noopener">Nanjing Securities Co Ltd (601990 CH)</a>, Gan&amp;Lee Pharma (603087 CH), <a href="https://www.smartkarma.com/entities/gongniu-group-co-ltd" target="_blank" data-smartkarma-citation="entities:30060:1" rel="noopener">Gongniu Group Co Ltd (603195 CH)</a>, <a href="https://www.smartkarma.com/entities/beijing-wantai-biological-a" target="_blank" data-smartkarma-citation="entities:30129:1" rel="noopener">Beijing Wantai Biological-A (603392 CH)</a>, <a href="https://www.smartkarma.com/entities/montage-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:28236:1" rel="noopener">Montage Technology Co Ltd (688008 CH)</a>, <a href="https://www.smartkarma.com/entities/china-railway-signal-com-a" target="_blank" data-smartkarma-citation="entities:28237:1" rel="noopener">China Railway Signal &amp; Com-A (688009 CH)</a>, <a href="https://www.smartkarma.com/entities/advanced-micro-fabrication-a" target="_blank" data-smartkarma-citation="entities:30308:1" rel="noopener">Advanced Micro-Fabrication-A (688012 CH)</a> and <a href="https://www.smartkarma.com/entities/shenzhen-transsion-holding-a" target="_blank" data-smartkarma-citation="entities:30323:1" rel="noopener">Shenzhen Transsion Holding-A (688036 CH).</a></p>
<p>The deletions are <a href="https://www.smartkarma.com/entities/hebei-iron-steel-co-ltd-a" target="_blank" data-smartkarma-citation="entities:11538:1" rel="noopener">Hebei Iron &amp; Steel Co Ltd A (000709 CH)</a>, <a href="https://www.smartkarma.com/entities/sichuan-tianqi-lithium-industries-inc" target="_blank" data-smartkarma-citation="entities:5698:1" rel="noopener">Sichuan Tianqi Lithium Industries, Inc (002466 CH)</a>, <a href="https://www.smartkarma.com/entities/zhejiang-idc-fluid-control-co-ltd" target="_blank" data-smartkarma-citation="entities:18695:1" rel="noopener">STO Express (002468 CH)</a>, <a href="https://www.smartkarma.com/entities/avic-helicopter-co-ltd-a" target="_blank" data-smartkarma-citation="entities:14380:1" rel="noopener">Avic Helicopter Co Ltd A (600038 CH)</a>, <a href="https://www.smartkarma.com/entities/tbea-co-ltd-a" target="_blank" data-smartkarma-citation="entities:20303:1" rel="noopener">Tbea Co Ltd A (600089 CH)</a>, <a href="https://www.smartkarma.com/entities/shanghai-construction-group-co-ltd" target="_blank" data-smartkarma-citation="entities:17136:1" rel="noopener">Shanghai Construction Group Co, Ltd. (600170 CH)</a>, <a href="https://www.smartkarma.com/entities/yanzhou-coal-mining-co-ltd" target="_blank" data-smartkarma-citation="entities:24592:1" rel="noopener">Yanzhou Coal Mining (600188 CH)</a>, <a href="https://www.smartkarma.com/entities/shandong-nanshan-aluminum-a" target="_blank" data-smartkarma-citation="entities:3920:1" rel="noopener">Shandong Nanshan Aluminum A (600219 CH)</a>, <a href="https://www.smartkarma.com/entities/hainan-airlines-co" target="_blank" data-smartkarma-citation="entities:24023:1" rel="noopener">Hainan Airlines Co (600221 CH)</a>, <a href="https://www.smartkarma.com/entities/china-avionics-systems-co-ltd" target="_blank" data-smartkarma-citation="entities:11393:1" rel="noopener">China Avionics Systems Co., Ltd. (600372 CH)</a>, <a href="https://www.smartkarma.com/entities/hla-corp-ltd" target="_blank" data-smartkarma-citation="entities:2586:1" rel="noopener">HLA CORP., Ltd. (600398 CH)</a>, <a href="https://www.smartkarma.com/entities/fangda-carbon-new-material-co-ltd" target="_blank" data-smartkarma-citation="entities:14878:1" rel="noopener">Fangda Carbon New Material Co, Ltd. (600516 CH)</a>, <a href="https://www.smartkarma.com/entities/offshore-oil-engineering-co-ltd-a" target="_blank" data-smartkarma-citation="entities:4968:1" rel="noopener">Offshore Oil Engineering A (600583 CH)</a>, <a href="https://www.smartkarma.com/entities/sichuan-chuantou-energy-stock-co-ltd" target="_blank" data-smartkarma-citation="entities:2557:1" rel="noopener">Sichuan Chuantou Energy Stock (600674 CH)</a>, <a href="https://www.smartkarma.com/entities/tonghua-dongbao-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:10358:1" rel="noopener">Tonghua Dongbao Pharmaceutical (600867 CH)</a>, <a href="https://www.smartkarma.com/entities/bank-of-xi-an-co-ltd" target="_blank" data-smartkarma-citation="entities:29936:1" rel="noopener">Bank of Xi'an Co Ltd (600928 CH)</a>, <a href="https://www.smartkarma.com/entities/cnooc-energy-technology-a" target="_blank" data-smartkarma-citation="entities:29941:1" rel="noopener">Cnooc Energy Technology &amp; -A (600968 CH)</a>, <a href="https://www.smartkarma.com/entities/china-film-co-ltd" target="_blank" data-smartkarma-citation="entities:29943:1" rel="noopener">China Film Co Ltd (600977 CH)</a>, <a href="https://www.smartkarma.com/entities/ningbo-port-co-ltd-a" target="_blank" data-smartkarma-citation="entities:9969:1" rel="noopener">Ningbo Port (601018 CH)</a>, <a href="https://www.smartkarma.com/entities/baiyin-nonferrous-group-co-a" target="_blank" data-smartkarma-citation="entities:29955:1" rel="noopener">Baiyin Nonferrous Group Co-A (601212 CH)</a>, <a href="https://www.smartkarma.com/entities/qingdao-port-international-co" target="_blank" data-smartkarma-citation="entities:29958:1" rel="noopener">Qingdao Port International Co (601298 CH)</a>, <a href="https://www.smartkarma.com/entities/red-star-macalline-group-corp" target="_blank" data-smartkarma-citation="entities:26732:1" rel="noopener">Red Star Macalline Group (601828 CH)</a>, <a href="https://www.smartkarma.com/entities/china-coal-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:24607:1" rel="noopener">China Coal Energy (601898 CH)</a>, <a href="https://www.smartkarma.com/entities/bbmg-corporation" target="_blank" data-smartkarma-citation="entities:22769:1" rel="noopener">BBMG Corporation (601992 CH)</a>, <a href="https://www.smartkarma.com/entities/bank-of-guiyang-co-ltd" target="_blank" data-smartkarma-citation="entities:27479:1" rel="noopener">Bank of Guiyang Co Ltd (601997 CH)</a> and <a href="https://www.smartkarma.com/entities/hoshine-silicon-industry-c-a" target="_blank" data-smartkarma-citation="entities:26646:1" rel="noopener">Hoshine Silicon Industry C-A (603260 CH)</a>.</p>
<p>Only 3 of the inclusions have over 1 day of ADV to buy, while there are a lot more deletions that have over 1 day of ADV to sell.</p>
<p>The index universe has also been expanded to include STAR Board stocks that have been listed for over 1 year. The change was implemented at this review (with no advance notice) and will see the inclusion of <a href="https://www.smartkarma.com/entities/montage-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:28236:1" rel="noopener">Montage Technology Co Ltd (688008 CH)</a>, <a href="https://www.smartkarma.com/entities/china-railway-signal-com-a" target="_blank" data-smartkarma-citation="entities:28237:1" rel="noopener">China Railway Signal &amp; Com-A (688009 CH)</a>, <a href="https://www.smartkarma.com/entities/advanced-micro-fabrication-a" target="_blank" data-smartkarma-citation="entities:30308:1" rel="noopener">Advanced Micro-Fabrication-A (688012 CH)</a> and <a href="https://www.smartkarma.com/entities/shenzhen-transsion-holding-a" target="_blank" data-smartkarma-citation="entities:30323:1" rel="noopener">Shenzhen Transsion Holding-A (688036 CH)</a> into the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a>. </p>

Post market close on Friday, the China Securities Index Company announced the changes to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) that will be effective after the close of trading on 11 December.
There are 26 inclusions and exclusions in the review with an estimated one-way turnover of 3.87%.
The inclusions are Unigroup Guoxin (002049 CH), Suzhou Dongshan Precision A (002384 CH), Wuhan Guide Infrared Co,Ltd. (002414 CH), Jpmf Guangdong Co Ltd A (002600 CH), Yunnan Chuangxin New Material (002812 CH), Asymchem Laboratories (002821 CH), Jafron Biomedical Co Ltd (300529 CH), Bgi Genomics (300676 CH), China Cssc Holdings Ltd A (600150 CH), Beijing Tiantan Biological Products (600161 CH), JCET Group (600584 CH), Tsingtao Brewery Co Ltd A (600600 CH), Topchoice Medical (600763 CH), Shanghai Baosight Software Co (600845 CH), Jonjee High-Tech Ind.&amp; Com. (600872 CH), Zhongtai Securities Co Ltd (600918 CH), Boc International China Co-A (601696 CH), China Merchants Energy A (601872 CH), Nanjing Securities Co Ltd (601990 CH), Gan&amp;Lee Pharma (603087 CH), Gongniu Group Co Ltd (603195 CH), Beijing Wantai Biological-A (603392 CH), Montage Technology Co Ltd (688008 CH), China Railway Signal &amp; Com-A (688009 CH), Advanced Micro-Fabrication-A (688012 CH) and Shenzhen Transsion Holding-A (688036 CH).
The deletions are Hebei Iron &amp; Steel Co Ltd A (000709 CH), Sichuan Tianqi Lithium Industries, Inc (002466 CH), STO Express (002468 CH), Avic Helicopter Co Ltd A (600038 CH), Tbea Co Ltd A (600089 CH), Shanghai Construction Group Co, Ltd. (600170 CH), Yanzhou Coal Mining (600188 CH), Shandong Nanshan Aluminum A (600219 CH), Hainan Airlines Co (600221 CH), China Avionics Systems Co., Ltd. (600372 CH), HLA CORP., Ltd. (600398 CH), Fangda Carbon New Material Co, Ltd. (600516 CH), Offshore Oil Engineering A (600583 CH), Sichuan Chuantou Energy Stock (600674 CH), Tonghua Dongbao Pharmaceutical (600867 CH), Bank of Xi'an Co Ltd (600928 CH), Cnooc Energy Technology &amp; -A (600968 CH), China Film Co Ltd (600977 CH), Ningbo Port (601018 CH), Baiyin Nonferrous Group Co-A (601212 CH), Qingdao Port International Co (601298 CH), Red Star Macalline Group (601828 CH), China Coal Energy (601898 CH), BBMG Corporation (601992 CH), Bank of Guiyang Co Ltd (601997 CH) and Hoshine Silicon Industry C-A (603260 CH).
Only 3 of the inclusions have over 1 day of ADV to buy, while there are a lot more deletions that have over 1 day of ADV to sell.
The index universe has also been expanded to include STAR Board stocks that have been listed for over 1 year. The change was implemented at this review (with no advance notice) and will see the inclusion of Montage Technology Co Ltd (688008 CH), China Railway Signal &amp; Com-A (688009 CH), Advanced Micro-Fabrication-A (688012 CH) and Shenzhen Transsion Holding-A (688036 CH) into the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX). 

STAR Board: CSI300 Index Rebalance: Rule Change Sees STAR Board Stocks Included

<p>The <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> consists of stocks from the Shanghai Stock Exchange and the Shenzhen Stock Exchange and is one of the most widely tracked A-share indices with passive tracking products listed in multiple markets globally. There are CFFEX listed futures that trade actively as well.</p><p>There were 21 changes to the index at the June review, and we expect up to 24 changes in the December review. Estimated one-way turnover is 4.06% and there are 4 inclusions and 11 deletions that could have more than 1 day of ADV to trade.</p><p>With passive tracking products holding around US$28bn of AUM, plus another US$35bn in open interest on the listed futures, there could be significant moves in the inclusion/exclusion names ahead of the rebalance announcement. There will only be 9-10 trading days between the announcement of the changes and the implementation, so having a pre-position should pay off.</p>

The Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) consists of stocks from the Shanghai Stock Exchange and the Shenzhen Stock Exchange and is one of the most widely tracked A-share indices with passive tracking products listed in multiple markets globally. There are CFFEX listed futures that trade actively as well.There were 21 changes to the index at the June review, and we expect up to 24 changes in the December review. Estimated one-way turnover is 4.06% and there are 4 inclusions and 11 deletions that could have more than 1 day of ADV to trade.With passive tracking products holding around US$28bn of AUM, plus another US$35bn in open interest on the listed futures, there could be significant moves in the inclusion/exclusion names ahead of the rebalance announcement. There will only be 9-10 trading days between the announcement of the changes and the implementation, so having a pre-position should pay off.

CSI300 Index Rebalance Preview: 21 Changes in June, Could Be 24 in December

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Yangzijiang Shipbuilding / Equity Bottom-Up

<h2>Share Price</h2><p><a href="https://www.smartkarma.com/entities/660" target="_blank" data-smartkarma-citation="entities:660:1">Yangzijiang Shipbuilding (YZJSGD SP)</a> share price went up almost doubled in FY 2017 only to lose 40% in FY 2018 YTD. On May 30th this year, the management issued a statement to buy 5 million shares in the open market, representing a 0.13% of the 57% free float. Some of the shareholders include a renown value investors such as Grantham, Mayo Van Otterloo and Co, Value Partners,  Norges Bank, Teachers Insurance and Annuity Association of America; names that should give investors <strong>comfort</strong>…</p>

Share PriceYangzijiang Shipbuilding (YZJSGD SP) share price went up almost doubled in FY 2017 only to lose 40% in FY 2018 YTD. On May 30th this year, the management issued a statement to buy 5 million shares in the open market, representing a 0.13% of the 57% free float. Some of the shareholders include a renown value investors such as Grantham, Mayo Van Otterloo and Co, Value Partners,  Norges Bank, Teachers Insurance and Annuity Association of America; names that should give investors comfort…

Yangzijiang: A Well Run Machine that Trades at 0.7x Book and 3.25 Ex-Cash PE

Leading Independent Investment Research, Morningstar, Inc.

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Thematic (Sector/Industry)

<p>The latest gathering of China’s National People’s Congress has produced some reassuring news for the domestic infrastructure sector. In our view, we should see a similar level of fixed-asset investment, or FAI, growth (8%-9%) in 2017, and the public-private partnership, or PPP, project financing method will play an increasingly instrumental role in infrastructure development. The National Development and Reform Commission, the nation’s top economic development planning agency, is targeting about 8% year-on-year FAI growth, with a heavy emphasis on transportation infrastructure development in both inland regions and prosperous coastal provinces. </p><p>The implied growth target in 2017 is in line with our assumption and reinforces our view that infrastructure firms with heavy PPP exposure (<a href="https://www.smartkarma.com/entities/265" target="_blank" data-smartkarma-citation="entities:265:1">China Communications Construction Co Ltd (1800 HK)</a>, or CCCC, and <a href="https://www.smartkarma.com/entities/265" target="_blank" data-smartkarma-citation="entities:265:1">China Communications Construction Co Ltd (1800 HK)</a>, or CSCI) are among the top beneficiaries in the latest transportation driven spending push. Our fair value estimates for no-moat CCCC and narrow-moat CSCI are unchanged at HKD 11.5 per share and HKD 14 per share, respectively, and we will revisit our valuations upon the release of annual results in late March.</p><p><em>Analyst: John Hu</em></p>

The latest gathering of China’s National People’s Congress has produced some reassuring news for the domestic infrastructure sector. In our view, we should see a similar level of fixed-asset investment, or FAI, growth (8%-9%) in 2017, and the public-private partnership, or PPP, project financing method will play an increasingly instrumental role in infrastructure development. The National Development and Reform Commission, the nation’s top economic development planning agency, is targeting about 8% year-on-year FAI growth, with a heavy emphasis on transportation infrastructure development in both inland regions and prosperous coastal provinces. The implied growth target in 2017 is in line with our assumption and reinforces our view that infrastructure firms with heavy PPP exposure (China Communications Construction Co Ltd (1800 HK), or CCCC, and China Communications Construction Co Ltd (1800 HK), or CSCI) are among the top beneficiaries in the latest transportation driven spending push. Our fair value estimates for no-moat CCCC and narrow-moat CSCI are unchanged at HKD 11.5 per share and HKD 14 per share, respectively, and we will revisit our valuations upon the release of annual results in late March.Analyst: John Hu

The Latest Government FAI Target Warrants Stable Growth Prospects for Infrastructure Sector

China

China CSSC Holdings Ltd. offers shipbuilding, ship components, ship repairing and diesel engines manufacturing. The Company distributes its products within the domestic market and to overseas markets.

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China CSSC Holdings Ltd A (600150 CH)

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Yangzijiang: A Well Run Machine that Trades at 0.7x Book and 3.25 Ex-Cash PE

Share PriceYangzijiang Shipbuilding (YZJSGD SP) share price went up almost doubled in FY 2017 only to lose 40% in FY 2018 YTD. On May 30th this...

Henry Soediarko

The Latest Government FAI Target Warrants Stable Growth Prospects for Infrastructure Sector

The latest gathering of China’s National People’s Congress has produced some reassuring news for the domestic infrastructure sector. In our view,...

Morningstar, Inc.

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