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

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Equity Capital Markets

Hana Materials Inc / Equity Capital Markets

<p>Hana Materials is a silicon manufacturing company. The company’s silicon products are mainly used in semiconductor production equipment. In fact, when it was founded in 2007, its name was Hana Silicon Tech. It was a JV between Hana Micron and US-based Nanotech Solution. In the following year, it changed its name to Hana Silicon. Its parent Hana Micron was founded in 2001 by several former Samsung employees. Like many tech ventures, the company had struggled for the first 4 years. Until 2010, it hadn’t turned profits. But in 2010, it successfully developed “480㎜single crystal ingot growing” which was a huge game changer for the company. In the subsequent year, the company again made another breakthrough. It successfully developed “520㎜ single crystal ingot growing”. Ingot is basically an anchor product, from which electrodes and rings can be derived. As a result, the company turned profits for the first time in 2010. Then finally in 2011, the company got an once in a life opportunity. Due to the devastating earthquake occurred in East Japan on March 11 2011, one of the world’s largest semiconductor equipment makers “Tokyo Electron” had a hard time getting components from Japan’s local suppliers. Electrode and ring were also some of the components that Tokyo Electron desperately needed. So, Tokyo Electron found out Hana Materials in Korea, and decided to make a 14.6% stake investment in Hana Materials for ₩5.4bil (1.16m shares at ₩4,500). Even, Tokyo Electron decided to transfer some of the key relevant technologies to Hana Materials.</p><p>Bouyed by Tokyo Electron’s backing, Hana Materials started generating decent sales and profits starting 2011. In 2013, the company decided to go for an IPO. But this IPO attempt didn’t go well. The market didn’t like the fact that the company’s sales were heavily dependent on Tokyo Electron, which was responsible for 78.54% of the total sales in 2012. So, the IPO plan was dropped and since then, the company tried to diversify its client base. The first target was AMAT. Locally, the company targeted SEMES, which is acting almost as a subsidiary of Samsung. In 2013, the company changed its name again to Hana Materials. In 2014, the company entered into a new business area by acquiring the specialty gases producer “Innomate”. So now, it has two major business areas: 1. silicon (electrode, ring and ingot) and 2. specialty gases (through “Innomate”). As for new businesses, the company is focusing on silicon carbide (SiC) products, which the company believes will eventually replace silicon components used in semiconductor production equipment.</p>

Hana Materials is a silicon manufacturing company. The company’s silicon products are mainly used in semiconductor production equipment. In fact, when it was founded in 2007, its name was Hana Silicon Tech. It was a JV between Hana Micron and US-based Nanotech Solution. In the following year, it changed its name to Hana Silicon. Its parent Hana Micron was founded in 2001 by several former Samsung employees. Like many tech ventures, the company had struggled for the first 4 years. Until 2010, it hadn’t turned profits. But in 2010, it successfully developed “480㎜single crystal ingot growing” which was a huge game changer for the company. In the subsequent year, the company again made another breakthrough. It successfully developed “520㎜ single crystal ingot growing”. Ingot is basically an anchor product, from which electrodes and rings can be derived. As a result, the company turned profits for the first time in 2010. Then finally in 2011, the company got an once in a life opportunity. Due to the devastating earthquake occurred in East Japan on March 11 2011, one of the world’s largest semiconductor equipment makers “Tokyo Electron” had a hard time getting components from Japan’s local suppliers. Electrode and ring were also some of the components that Tokyo Electron desperately needed. So, Tokyo Electron found out Hana Materials in Korea, and decided to make a 14.6% stake investment in Hana Materials for ₩5.4bil (1.16m shares at ₩4,500). Even, Tokyo Electron decided to transfer some of the key relevant technologies to Hana Materials.Bouyed by Tokyo Electron’s backing, Hana Materials started generating decent sales and profits starting 2011. In 2013, the company decided to go for an IPO. But this IPO attempt didn’t go well. The market didn’t like the fact that the company’s sales were heavily dependent on Tokyo Electron, which was responsible for 78.54% of the total sales in 2012. So, the IPO plan was dropped and since then, the company tried to diversify its client base. The first target was AMAT. Locally, the company targeted SEMES, which is acting almost as a subsidiary of Samsung. In 2013, the company changed its name again to Hana Materials. In 2014, the company entered into a new business area by acquiring the specialty gases producer “Innomate”. So now, it has two major business areas: 1. silicon (electrode, ring and ingot) and 2. specialty gases (through “Innomate”). As for new businesses, the company is focusing on silicon carbide (SiC) products, which the company believes will eventually replace silicon components used in semiconductor production equipment.

Hana Materials IPO Summary - Strong Captive Market (Tokyo Electron) & Promising New Market (Samsung)