Ship IPO puts wind back in Korea Inc's sails

HD Hyundai Marine Solution

08/05/2024 04:41

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Robyn Mak
       HONG KONG, May 8 (Reuters Breakingviews) - A KKR-backed
 KKR.N  marine services firm may help South Korea catch up.
Thanks to the artificial intelligence craze and geopolitics,
equities across Asia are having their moment. The KOSPI 200
 .KS200 , though, has risen just 4% since the start of the year,
underperforming benchmark indices in Japan, Taiwan and even Hong
Kong. Wednesday's successful debut of HD Hyundai Marine Solution
 443060.KS , which surged more than 40% in early trading, should
buoy sentiment.
    Despite boasting global champions in semiconductors, autos
and more, South Korea's $1.8 trillion stock market suffers from
an anaemic valuation. Blame powerful family-controlled
conglomerates and weak corporate oversight. Taking a page out of
Japan's big push to improve shareholder returns - which has
helped lift the Nikkei 225 Index  .N225  16% this year - South
Korea's stock market watchdog in February unveiled its
"Corporate Value-up Program".
    Since then, overseas investors have bought a net $7
billion-worth of stocks, data from Korea Exchange show, helping
boost foreign ownership of the KOSPI  .KS11  to roughly 35% as
of early April - a three-year high. That's not bad, but with the
Nikkei ascending this year to record levels, South Korea is
lagging behind.
    That's partly self-inflicted. Last year, financial
authorities banned short-selling. At the time, critics accused
the government of meddling to please a huge constituency of
retail investors ahead of parliamentary elections. The ban is
set to expire next month but has probably dampened sentiment,
particularly for institutional investors suddenly unable to
hedge their positions. 
    Against this backdrop, a lot was riding on HD Hyundai Marine
Solution's initial public offering - the country's largest float
in more than two years. On paper, there's plenty to like about
the company, which specialises in marine services spanning
repair, maintenance and reconstruction. Earnings surged 44% last
year to 151.1 billion won ($111 million), thanks to booming
demand from ships going green. These eco-friendly vessels
require more servicing and parts than conventional ones.
    Better yet, the company is part of the HD Hyundai
shipbuilding-to-oil refinery conglomerate and counts private
equity heavyweight KKR as a major shareholder. Institutional
investors bid for 200 times the amount of shares on offer, IFR
reported, with allocations "heavily skewed" towards long-only
funds.
    At the very least, the strong debut should nudge other IPO
hopefuls such as online lender K Bank, fintech darling Viva
Republica and Tencent-backed  0700.HK  video-games developer
Shift Up. South Korea's markets are primed to go full steam
ahead.

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    CONTEXT NEWS
    Shares in South Korea's HD Hyundai Marine Solution opened up
almost 44% at 119,900 won on their debut on May 8.
    The company, which specialises in marine after-sales and
retrofit services including maintenance, repair, and
reconstruction, priced its shares at 83,400 won each, the top of
the indicative price range. 
    As part of the deal, the company sold 4.45 million new
shares, while its second-largest shareholder KKR sold 4.45
million of its shares. In total, the IPO raised 742 billion won
($546.39 million).
    Following the offering, parent HD Hyundai holds a 55.8%
stake and Global Vessel Solutions, which is managed by KKR,
holds 24.2%.

 (Editing by Antony Currie and Aditya Sriwatsav)
 ((For previous columns by the author, Reuters customers can
click on  MAK/   
robyn.mak@thomsonreuters.com; Reuters Messaging:
robyn.mak.thomsonreuters.com@reuters.net))