Hyundai Heavy plans IPO this year; valuation to approach $4.5 bn

South Korea-based Hyundai Heavy Industries Co. is planning a trading debut this year, with the proceeds marked for future growth engines to power the company's technological prowess in the global shipbuilding market.

The company announced on Jan. 26 that it aims to invest up to 1 trillion won ($903.3 million) over the next five years to develop eco-friendly ships and establishing production facilities.

The investment capital will be raised via an initial public offering, in which Hyundai Heavy plans to issue new shares worth a 20% stake in the company. The company will soon begin the process of hiring an IPO manager.

The IPO proceeds will be used to develop eco-friendly ships fueled by hydrogen and ammonia, alongside maritime autonomous surface ships and dual-fuel ships. The company will also push for fuel cell-related M&A activities and lay the groundwork for environmental, social and governance (ESG) management.

"Technology is the only key to the future in times of uncertainty. We will take the lead in changing the market by offering competitive technology," said Kwon Oh-gap, chairman of Hyundai Heavy Industries Holdings.

The financial investment industry estimates Hyundai Heavy to be valued at around 5 trillion won ($4.5 billion), based on industry competitors Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co., which have a market capitalization of around 4.3 trillion won and 2.9 trillion won, respectively.

SHIPPING INDUSTRY BOOM PAVES THE WAY FOR IPO

Hyundai Heavy considers it an opportune time to go public since the shipbuilding industry has been showing steadfast recovery, which may help the company score a good valuation.

During the first half of last year, Korean shipbuilders struggled as orders were almost non-existent due to the global pandemic, causing shipyards to delay orders alongside a temporary suspension of global LNG projects.

Fortunately the tide turned in the second half as Korean shipbuilders secured lucrative contracts, allowing them to hold their lead in the global shipbuilding market for the third year in a row.

This year, the shipbuilding industry expects to see increased orders for container vessels and oil tankers.

“Now is the time for aggressive investment into facilities and equipment as we expect to see improved performances alongside a recovery in shipbuilding orders," said a Hyundai Heavy official.

According to shipping intelligence provider Clarksons Research, global ship orders are likely to reach 23.8 million compensated gross tonnage (CGT) this year, up by 21% from the previous year.

The intelligence provider also projected an average of 35.1 million CGT order placements to be made annually between 2022 and 2025.

However, industry sources say that Hyundai Heavy Industries Group may not have the capacity to make hefty investments as it is currently in the process of acquiring  construction equipment maker Doosan Infracore Co. and merging with hometown rival Daewoo Shipbuilding & Marine Engineering Co.

HYUNDAI SAMHO EYES 2022 LISTING

Meanwhile, industry watchers say that Hyundai Heavy Industries Group is also planning to list Hyundai Samho Heavy Industries Co., the world's fourth-largest shipbuilder, in 2022, as it will be the only non-listed shipbuilder within the group once Hyundai Heavy is listed.

Korea Shipbuilding & Offshore Engineering Co. (KSOE), the intermediate holding company of the shipbuilding group and the parent company of Hyundai Heavy, also governs Hyundai Mipo Dockyard Co. and Hyundai Samho.

This year the shipbuilding group targets a combined $14.9 billion in new orders for 2021, up 35.4% from last year’s results of $11 billion for 116 vessels.


Write to Man-su Choe at bepop@hankyung.com
Danbee Lee edited this article.