Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Hyundai Engineering   / Equity Capital Markets

<ul>
<li>Hyundai Engineering Co Ltd is getting ready to complete its IPO in KOSPI in February 2022. The IPO price range is from 57,900 won to 75,700 won per share. </li>
<li>The IPO of Hyundai Engineering could be an important catalyst for the restructuring of the entire Hyundai Motor Group as Chung Eui-Sun could increase his stake in Hyundai Mobis.</li>
<li>The bankers included too many overseas comps with fat valuation multiples. This is a bit concerning in terms of how the bankers derived the IPO price range.</li>
</ul>


Hyundai Engineering Co Ltd is getting ready to complete its IPO in KOSPI in February 2022. The IPO price range is from 57,900 won to 75,700 won per share. 
The IPO of Hyundai Engineering could be an important catalyst for the restructuring of the entire Hyundai Motor Group as Chung Eui-Sun could increase his stake in Hyundai Mobis.
The bankers included too many overseas comps with fat valuation multiples. This is a bit concerning in terms of how the bankers derived the IPO price range.


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

Hyundai Engineering & Construction / Event-Driven

<p>Hyundai E&amp;C 1P's subscription rights trading was very active on the first trading day. In this event, which offers a total of 2 million preferred shares, 1.83M subscription rights are listed for trade.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Hyundai E&amp;C 68PR"}'>Hyundai E&amp;C 68PR</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total offering"}'>Total offering</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2000000}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>2,000,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights listed for trade"}'>Subscription rights listed for trade</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1832367}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>1,832,367</td>
</tr>
<tr><td colspan="2">Source: KRX</td></tr>
</tbody>
</table><p>Of this, 0.51M, nearly a third, was traded on the first trading day. Interestingly, however, the rights price fell sharply in the afternoon, ending at ₩3,460. On this day, VWAP was ₩6,419.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights (₩)"}'>Subscription rights</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Close"}'>Close</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Volume"}'>Volume</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Value"}'>Value</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"VWAP"}'>VWAP</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44470}' data-sheets-numberformat='{"1":5,"2":"mm\"/\"dd","3":1}' data-sheets-formula="=R[-1]C[0]-4">10/01</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3460}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩3,460</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":510183}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>510,183</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3274741535}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}'>₩3,274,741,535</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6418.7586317066625}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[0]C[-1]/R[0]C[-2]">₩6,419</td>
</tr>
<tr><td colspan="5" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><div><p>This offering has a whopping 45% discount. The specific formula of how to fix the offering price is shown below.</p></div><div><div>
<table class="table table-striped">
<colgroup>
<col width="400">
<col width="400">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1st round"}'>1st round</td>
<td data-sheets-value='{"1":2,"2":"RP × (1 - 45%) / [1 + (1.79% × 45%)]"}' data-sheets-formula='="RP × (1 - "&amp;(R[11]C[0]*100&amp;"%")&amp;") / [1 + ("&amp;(R[12]C[0]*100&amp;"%"&amp;" × "&amp;(R[11]C[0]*100&amp;"%"&amp;")]"))'>RP × (1 - 45%) / [1 + (1.79% × 45%)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]"}'>Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44438}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}' data-sheets-formula="=Terms!R[26]C[0]">2021. 08. 30</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights base price"}'>Ex-rights base price</td>
<td data-sheets-value='{"1":2,"2":"[RP + (1st × 1.79%)] / (1 + 1.79%)"}' data-sheets-formula='="[RP + (1st × "&amp;R[9]C[0]*100&amp;"%"&amp;")] / (1 + "&amp;R[9]C[0]*100&amp;"%"&amp;")"'>[RP + (1st × 1.79%)] / (1 + 1.79%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Previous close"}'>Previous close</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44440}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}' data-sheets-formula="=Terms!R[24]C[0]">2021. 09. 01</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2nd round"}'><strong>2nd round</strong></td>
<td data-sheets-value='{"1":2,"2":"RP × (1 - 45%)"}' data-sheets-formula='="RP × (1 - "&amp;(R[5]C[0]*100&amp;"%")&amp;")"'><strong>RP × (1 - 45%)</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'><strong>- Reference price (RP)</strong></td>
<td data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP)]"}'><strong>Min [Close, Avg (Close, 1W VWAP)]</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'><strong>- Reference date</strong></td>
<td data-sheets-value='{"1":3,"3":44487}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[25]C[0]"><strong>2021. 10. 18</strong></td>
</tr>
<tr><td colspan="2"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final"}'>Final</td>
<td data-sheets-value='{"1":2,"2":"Min (1st, 2nd)"}'>Min (1st, 2nd)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44487}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[23]C[0]">2021. 10. 18</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount rate"}'><strong>Discount rate</strong></td>
<td data-sheets-value='{"1":3,"3":0.45}'><strong>45.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td data-sheets-value='{"1":3,"3":0.0179}' data-sheets-formula="=Terms!R[4]C[0]">1.79%</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<p>The 1st round price got settled at ₩98,300, which, of course, serves as the ceiling price since whichever lower of the 1st and the 2nd will be the final price.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/488/original/1.png?1633388693" class="editor-image img-responsive" data-smartkarma-image-id="233488"></figure></section><p>Of course, we don't know where and how much the 1P price will head and will get corrected before the 2nd round pricing date, which is October 18. But at the current price, we have this vast spread. If we buy subscription rights at the last close (₩3,460) and the current 1P share price holds until October 18, we will likely enjoy a 75.40% return.</p>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Spread status"}'>Spread status</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'>Current price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":172000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula='=googlefinance(Terms!R[-11]C[0], "price")'>₩172,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":": 45% discount"}'>: 45% discount</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":94600.00000000001}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[-1]C[0]*(1-0.45)">₩94,600</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights price"}'>Subscription rights price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3460}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0","3":1}' data-sheets-formula="=R[-14]C[0]">₩3,460</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread"}'><strong>Spread</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7540281460330407}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-3]C[0]-(R[-2]C[0]+R[-1]C[0]))/(R[-2]C[0]+R[-1]C[0])"><strong>75.40%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>
</div></div>

Hyundai E&amp;C 1P's subscription rights trading was very active on the first trading day. In this event, which offers a total of 2 million preferred shares, 1.83M subscription rights are listed for trade.





Hyundai E&amp;C 68PR

Total offering
2,000,000


Subscription rights listed for trade
1,832,367

Source: KRX

Of this, 0.51M, nearly a third, was traded on the first trading day. Interestingly, however, the rights price fell sharply in the afternoon, ending at ₩3,460. On this day, VWAP was ₩6,419.









Subscription rights
Close
Volume
Value
VWAP


10/01
₩3,460
510,183
₩3,274,741,535
₩6,419

Source: KRX

This offering has a whopping 45% discount. The specific formula of how to fix the offering price is shown below.






Pricing

1st round
RP × (1 - 45%) / [1 + (1.79% × 45%)]


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


- Reference date
2021. 08. 30


Ex-rights base price
[RP + (1st × 1.79%)] / (1 + 1.79%)


- Reference price (RP)
Previous close


- Reference date
2021. 09. 01



2nd round
RP × (1 - 45%)


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


- Reference date
2021. 10. 18

 

Final
Min (1st, 2nd)


- Reference date
2021. 10. 18


Discount rate
45.00%


Capital increase rate
1.79%

Source: DART


The 1st round price got settled at ₩98,300, which, of course, serves as the ceiling price since whichever lower of the 1st and the 2nd will be the final price.
Of course, we don't know where and how much the 1P price will head and will get corrected before the 2nd round pricing date, which is October 18. But at the current price, we have this vast spread. If we buy subscription rights at the last close (₩3,460) and the current 1P share price holds until October 18, we will likely enjoy a 75.40% return.






Spread status

Current price
₩172,000


: 45% discount
₩94,600


Subscription rights price
₩3,460


Spread
75.40%

Source: KRX




Hyundai E&C 1P Offering: A Vast Spread, but Worth Taking the Risk?

<h2>Offering overview</h2><p>A very unusual rights offering was recently announced in the Korean market.</p><div class="content-highlight"><p><strong>Hyundai E&amp;C announced this unusual capital increase, saying it would issue 2 million new preferred stocks.</strong></p></div><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Overview"}'>Overview</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Issuer"}'><strong>Shares to be issued</strong></td>
<td data-sheets-value='{"1":2,"2":"Hyundai Engineering &amp; Construction Co. Preference Shares"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'><strong>Hyundai Engineering &amp; Construction Co. Preference Shares</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'><strong>Ticker</strong></td>
<td data-sheets-value='{"1":2,"2":"000725"}' data-sheets-formula='="000725"'><strong>000725</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target"}'>Target</td>
<td data-sheets-value='{"1":2,"2":"A public offering of forfeited shares after offering to stockholders"}'>A public offering of forfeited shares after offering to stockholders</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transferability"}'>Transferability</td>
<td data-sheets-value='{"1":2,"2":"Renounceable"}'>Renounceable</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Volume"}'><strong>Volume</strong></td>
<td data-sheets-value='{"1":3,"3":2000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>2,000,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary price"}'>Preliminary price</td>
<td data-sheets-value='{"1":3,"3":114500}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩114,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary value"}'>Preliminary value</td>
<td data-sheets-value='{"1":3,"3":229000000000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]">₩229,000,000,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Oversubscription privilege"}'>Oversubscription privilege</td>
<td data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td data-sheets-value='{"1":2,"2":"KIS &amp; Hyundai Motor Securities"}'>KIS &amp; Hyundai Motor Securities</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>Although the capital increase ratio resulting from these 2 million shares remains at 1.79%, the offering volume is 20 times the size of the currently issued preferred stock.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Allocation"}'>Capital increase rate</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary - before rights offer</td>
<td data-sheets-value='{"1":3,"3":111355765}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance("000720", "shares")'>111,355,765</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Pref"}'><strong>Pref - before rights offer</strong></td>
<td data-sheets-value='{"1":3,"3":98856}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[-12]C[0], "shares")'><strong>98,856</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offer volume"}'><strong>Offer volume</strong></td>
<td data-sheets-value='{"1":3,"3":2000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>2,000,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'><strong>Capital increase rate</strong></td>
<td data-sheets-value='{"1":3,"3":0.0179}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>1.79%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares after rights offer"}'>Total shares after rights offer</td>
<td data-sheets-value='{"1":3,"3":113454621}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">113,454,621</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ordinary"}'>- Ordinary</td>
<td data-sheets-value='{"1":3,"3":111355765}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-6]C[0]">111,355,765</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Pref"}'>- Pref</td>
<td data-sheets-value='{"1":3,"3":2098856}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-6]C[0]+R[-5]C[0]">2,098,856</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>And what's even more shocking is that the discount rate applied when calculating the final offering price is a whopping 45%.</p><div class="content-highlight"><p><strong>For local rights offerings, a discount rate of 15-20% is usually applied. In contrast, this rights offering applies a discount rate of more than double the usual level.</strong></p></div><table class="table table-striped">
<colgroup>
<col width="400">
<col width="400">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1st round"}'>1st round</td>
<td data-sheets-value='{"1":2,"2":"RP × (1 - 45%) / [1 + (1.79% × 45%)]"}' data-sheets-formula='="RP × (1 - "&amp;(R[11]C[0]*100&amp;"%")&amp;") / [1 + ("&amp;(R[12]C[0]*100&amp;"%"&amp;" × "&amp;(R[11]C[0]*100&amp;"%"&amp;")]"))'>RP × (1 - 45%) / [1 + (1.79% × 45%)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]"}'>Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44438}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}' data-sheets-formula="=Terms!R[26]C[0]">2021. 08. 30</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights base price"}'>Ex-rights base price</td>
<td data-sheets-value='{"1":2,"2":"[RP + (1st × 1.79%)] / (1 + 1.79%)"}' data-sheets-formula='="[RP + (1st × "&amp;R[9]C[0]*100&amp;"%"&amp;")] / (1 + "&amp;R[9]C[0]*100&amp;"%"&amp;")"'>[RP + (1st × 1.79%)] / (1 + 1.79%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Previous close"}'>Previous close</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44440}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}' data-sheets-formula="=Terms!R[24]C[0]">2021. 09. 01</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2nd round"}'>2nd round</td>
<td data-sheets-value='{"1":2,"2":"RP × (1 - 45%)"}' data-sheets-formula='="RP × (1 - "&amp;(R[5]C[0]*100&amp;"%")&amp;")"'>RP × (1 - 45%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP)]"}'>Min [Close, Avg (Close, 1W VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44487}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[25]C[0]">2021. 10. 18</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final"}'>Final</td>
<td data-sheets-value='{"1":2,"2":"Min (1st, 2nd)"}'>Min (1st, 2nd)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44487}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[23]C[0]">2021. 10. 18</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount rate"}'><strong>Discount rate</strong></td>
<td data-sheets-value='{"1":3,"3":0.45}'><strong>45.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td data-sheets-value='{"1":3,"3":0.0179}' data-sheets-formula="=Terms!R[4]C[0]">1.79%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>In this rights offering, 20% will be allocated to the ESOP, and the remaining 80% will be allocated to shareholders.</p><div class="content-highlight"><p><strong>Of course, not only shareholders who own preferred stocks but also shareholders who own common stocks are given the same purchase rights. So the allocation ratio per share becomes 0.0143556.</strong></p></div><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Allocation"}'>Allocation</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Per-share allocation"}'><strong>Per-share allocation</strong></td>
<td data-sheets-value='{"1":3,"3":0.014355618328288066}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[7]C[0]/(R[-3]C[0]+R[-2]C[0])"><strong>0.0143556</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP allocation"}'>ESOP allocation</td>
<td data-sheets-value='{"1":3,"3":400000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>400,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-7]C[0]">20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder allocation"}'><strong>Stockholder allocation</strong></td>
<td data-sheets-value='{"1":3,"3":1600000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>1,600,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'><strong>- %</strong></td>
<td data-sheets-value='{"1":3,"3":0.8}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-9]C[0]"><strong>80.00%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The schedule is as follows. The first-round price is confirmed on Aug. 30, and this becomes the ceiling of the offering price. And since September 1 is the ex-date, the stock must be held by August 31 to be granted the subscription right. After that, the subscription rights will be traded for 5 trading days from October 1 to 8, and the final price will be confirmed on October 18. The new stock listing date is November 5.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Timetable"}'>Timetable</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</td>
<td data-sheets-value='{"1":3,"3":44400}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 07. 23</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary pricing"}'><strong>Preliminary pricing</strong></td>
<td data-sheets-value='{"1":3,"3":44438}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'><strong>2021. 08. 30</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights date"}'><strong>Ex-rights date</strong></td>
<td data-sheets-value='{"1":3,"3":44440}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'><strong>2021. 09. 01</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date"}'>Record date</td>
<td data-sheets-value='{"1":3,"3":44441}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 02</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade beginning"}'><strong>Subscription rights trade beginning</strong></td>
<td data-sheets-value='{"1":3,"3":44470}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'><strong>2021. 10. 01</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade ending"}'><strong>Subscription rights trade ending</strong></td>
<td data-sheets-value='{"1":3,"3":44477}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'><strong>2021. 10. 08</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final pricing"}'>Final pricing</td>
<td data-sheets-value='{"1":3,"3":44487}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 10. 18</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder subscription"}'>Stockholder subscription</td>
<td data-sheets-value='{"1":3,"3":44490}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 10. 21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td data-sheets-value='{"1":3,"3":44495}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 10. 26</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td data-sheets-value='{"1":3,"3":44505}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'><strong>2021. 11. 05</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

Offering overviewA very unusual rights offering was recently announced in the Korean market.Hyundai E&amp;C announced this unusual capital increase, saying it would issue 2 million new preferred stocks.





Overview

Shares to be issued
Hyundai Engineering &amp; Construction Co. Preference Shares


Ticker
000725


Target
A public offering of forfeited shares after offering to stockholders


Transferability
Renounceable


Volume
2,000,000


Preliminary price
₩114,500


Preliminary value
₩229,000,000,000


Oversubscription privilege
20.00%


Banker
KIS &amp; Hyundai Motor Securities

Source: DART

Although the capital increase ratio resulting from these 2 million shares remains at 1.79%, the offering volume is 20 times the size of the currently issued preferred stock.





Capital increase rate

Ordinary - before rights offer
111,355,765


Pref - before rights offer
98,856


Offer volume
2,000,000


Capital increase rate
1.79%


Total shares after rights offer
113,454,621


- Ordinary
111,355,765


- Pref
2,098,856

Source: DART

And what's even more shocking is that the discount rate applied when calculating the final offering price is a whopping 45%.For local rights offerings, a discount rate of 15-20% is usually applied. In contrast, this rights offering applies a discount rate of more than double the usual level.





Pricing

1st round
RP × (1 - 45%) / [1 + (1.79% × 45%)]


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


- Reference date
2021. 08. 30


Ex-rights base price
[RP + (1st × 1.79%)] / (1 + 1.79%)


- Reference price (RP)
Previous close


- Reference date
2021. 09. 01


2nd round
RP × (1 - 45%)


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


- Reference date
2021. 10. 18


Final
Min (1st, 2nd)


- Reference date
2021. 10. 18


Discount rate
45.00%


Capital increase rate
1.79%

Source: DART

In this rights offering, 20% will be allocated to the ESOP, and the remaining 80% will be allocated to shareholders.Of course, not only shareholders who own preferred stocks but also shareholders who own common stocks are given the same purchase rights. So the allocation ratio per share becomes 0.0143556.





Allocation

Per-share allocation
0.0143556


ESOP allocation
400,000


- %
20.00%


Stockholder allocation
1,600,000


- %
80.00%

Source: DART

The schedule is as follows. The first-round price is confirmed on Aug. 30, and this becomes the ceiling of the offering price. And since September 1 is the ex-date, the stock must be held by August 31 to be granted the subscription right. After that, the subscription rights will be traded for 5 trading days from October 1 to 8, and the final price will be confirmed on October 18. The new stock listing date is November 5.





Timetable

BOD meeting
2021. 07. 23


Preliminary pricing
2021. 08. 30


Ex-rights date
2021. 09. 01


Record date
2021. 09. 02


Subscription rights trade beginning
2021. 10. 01


Subscription rights trade ending
2021. 10. 08


Final pricing
2021. 10. 18


Stockholder subscription
2021. 10. 21


Payment
2021. 10. 26


Listing
2021. 11. 05

Source: DART



Hyundai E&C's Unusual 1P Offering with a Shocking 45% Discount

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Shanghai Shenzhen CSI 300 Inde / Technical Analysis

<p>Global equities (MSCI ACWI, ACWI ex-US, and EAFE) remain bullish with their uptrends intact, and the MSCI Emerging Markets index continues to hold above major support at $52 on the EEM-US. Additionally, Europe’s STOXX 50 and Hong Kong’s Hang Seng are on the cusp of short-term breakouts, while the major indexes in China (Shanghai Composite &amp; CSI 300) are currently breaking above short-term resistance... <em>see chart below</em>. Considering the absence of breakdowns and the fact that market dynamics remain largely positive, our overall constructive outlook remains appropriate.</p>

Global equities (MSCI ACWI, ACWI ex-US, and EAFE) remain bullish with their uptrends intact, and the MSCI Emerging Markets index continues to hold above major support at $52 on the EEM-US. Additionally, Europe’s STOXX 50 and Hong Kong’s Hang Seng are on the cusp of short-term breakouts, while the major indexes in China (Shanghai Composite &amp; CSI 300) are currently breaking above short-term resistance... see chart below. Considering the absence of breakdowns and the fact that market dynamics remain largely positive, our overall constructive outlook remains appropriate.

Chinese Indexes Headed Higher; Actionable Themes: Transportation, Materials, and Services

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

South Korea

KEPCO Engineering & Construction Company, Inc. designs nuclear and conventionally-fueled electricity generating plants.  The Company also provides power plant engineering services and consulting services to power industry.

Kepco Engineering & Construction (052690 KS)

Samsung Engineering Co., Ltd. provides engineering construction and project management services in the domestic and international markets. The Company constructs refinery plants, petrochemical plants, gas plants, hydrocarbon upstream, power plants, metallurgy plant, industrial plants, and water treatment facilities.

Daewoo Engineering & Construction Co., Ltd. is a general engineering constructor.  The Company's projects include architectural works, such as commercial buildings, public facilities, schools, hospitals, and civil works, such as highways, ports, tunnels, railways, and dams.  Daewoo Engineering & Construction also constructs power plants, and residential buildings.

Daewoo Engineering & Construction (047040 KS)

GS Engineering & Construction Corp. contracts civil engineering and architectural works, residential and commercial building constructions, and plant installations.  The Company also builds educational, leisure, distribution, and environmental facilities.

GS Engineering & Construction (006360 KS)

DL Holdings Co., Ltd. provides civil engineering, architectural, and plant construction services. The Company constructs bridges, highways, tunnels, harbors, and governmental buildings. DL also manufactures petrochemical products , including polyester, benzene, butane, and methyl tertiary butyl ether (MTBE).

HDC Hyundai Development Co-Engineering & Construction offers construction services. The Company builds factories, office and retail buildings, hotels, and warehouses. HDC Hyundai Development Co-Engineering & Construction provides its services throughout Korea.

HDC Hyundai Development Co-Engineering & Construction (294870 KS)

HDC Hyundai Development Co-Engineering & Construction

Hyundai Construction Equipment Corporation manufactures construction equipment. Hyundai Construction Equipment Corporation is located in South Korea. Hyundai Construction Equipment Corporation operates independently of Hyundai Heavy Industries Co., Ltd. as of April 1, 2017.

Hyundai Construction Equipment (267270 KS)

LS Marine Solution Co., Ltd. operates as a submarine communication cables and offshore plants construction and maintenance company. The Company provides submarine fiber optic cable installation, submarine power cable installation, and other related services. LS Marine Solution also offers offshore energy sources development and derrick assembly services.

HDC Holdings Co.,Ltd operates as a real estate owner and developer. The Company develops residential areas, office buildings, hotels, restaurants, and other related areas. HDC Holdings offers services throughout South Korea.

Sambu Construction Co., Ltd. specializes in government construction, such as dams, expressways, and subways.  The Company also constructs office buildings, industrial plants, hotels, apartments, schools, shopping malls, museums, and sports facilities.

Dialog Group Berhad is an investment holding company.  The Company, through its subsidiaries, provides engineering, procurement, construction and commissioning services, and plant maintenance services. Dialog also retails petroleum to oil, gas, and petrochemical industries, as well as markets specialty chemical and equipments.

KANDENKO CO., LTD. constructs electrical and power facilities such as indoor electrical wiring and high voltage transmission lines.  The Company, affiliated with Tokyo Electric Power, also constructs environmental facilities and communication infrastructure.  The Company, through its subsidiaries, sells electrical machinery.

Shanghai Tunnel Engineering Co., Ltd. undertakes heavy construction projects. The Company constructs tunnels, subways, crossing bridges, highways, and building infrastructure facilities.  The Company also provides engineering services, invests in real estate development, and operates restaurants.

Shanghai Tunnel Engineering Co, Ltd. (600820 CH)

KYUDENKO CORPORATION constructs power transmission and transformation facilities.  The Company also performs indoor electrical wiring, water treatment, air-conditioning, and piping works.  Additionally, Kyudenko runs leasing operations for automobiles and office automation equipment.

MYR Group Inc. contracts electrical infrastructure projects. The Company maintains a fleet of specialized transmission and distribution equipment. MYR serves commercial and industrial markets in the United States.

China Railway Erju Co., Ltd. designs and engineers railways, including the Qingzang railway and the Neikung railway.  The Company also constructs bridges, roads, and facilities for industrial, energy, and residential applications.

Kalpataru Power Transmission Limited manufactures transmission line towers for power distribution which are sold to The Power Grid Corporation of India and State Electricity Boards. The Company also exports its products to various countries and it also develops real estate.

KYOWA EXEO CORPORATION designs, constructs, maintains communication, electrical, and environmental facilities.  The Company also develops software for information systems.  Kyowa Exeo, through its subsidiaries, operates distribution, security, and consulting businesses.

Granite Construction Incorporated is a heavy civil construction and transportation contractor serving both public and private sector clients.  The Company concentrates on infrastructure projects including the construction of roads, bridges, dams, tunnels, mass transit facilities, and airports.  Granite also performs site preparation services for the private sector.

NCC Ltd. is a construction company. The Group undertakes civil and structural infrastructure projects, real estate development and light engineering projects.

Hyundai Engineering & Construction Co., Ltd., a general construction company, provides civil engineering, architectural, industrial, and electrical engineering services.  The Company constructs roadways, dams, bridges, ports, industrial plants, apartment complexes, and cultural facilities.

Hyundai Engineering & Construction (000720 KS)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hyundai Engineering & Construction (000720 KS)

Hyundai Engineering IPO Preview

Hyundai Engineering Co Ltd is getting ready to complete its IPO in KOSPI in February 2022. The IPO price range is from 57,900 won to 75,700 won per...

Douglas Kim

Hyundai E&C 1P Offering: A Vast Spread, but Worth Taking the Risk?

This post looks at the current situation of Hyundai E&C 1P offering, which is still at a massive spread. It discusses the inherent trading risk and...

Sanghyun Park

Hyundai E&C's Unusual 1P Offering with a Shocking 45% Discount

This post details Hyundai E&C's unusual 1P offering with a shocking 45% discount and examines outright trade opportunities.

Sanghyun Park

Chinese Indexes Headed Higher; Actionable Themes: Transportation, Materials, and Services

The evidence continues to suggest that value remains leadership and we recommend adding exposure to cyclical value on this minor pullback in the...

Vermilion Research

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

With the resumption of short selling in Korea, we highlight correlated pairs from the same GICS sub-industry that are near reversion points and...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)