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IPOs

Hyundai Heavy IPO creates largest shipbuilder on Kospi

Its parent company Korea Shipbuilding & Offshore Engineering's shares have dropped by more than 10%

By Sep 17, 2021 (Gmt+09:00)

Hyundai Heavy IPO creates largest shipbuilder on Kospi 

Hyundai Heavy Industries Co. successfully went public on Sept. 17 by closing at almost double its IPO price. The stock price closed at 111,500 won ($94.68) a share, up 85.8% from its initial offering price at 60,000 won ($50.95).

But the volatility was extremely high for the shipbuilding unit during its first trading day. The stock started trading at 111,000 won ($94.24) before dropping sharply down to 91,000 won ($77.26) and hiking up fast to 135,000 won ($114.60) to per unit.

Hyundai Heavy Industries became the 43rd-largest company on the local bourse Kospi with a market cap of 9.9 trillion won ($8.4 billion), surpassing its parent company Korea Shipbuilding & Offshore Engineering Co. (KSOE) and Daewoo Shipbuilding & Marine Engineering Co. (DSME). KSOE shares on its subsidiary’s listing day dropped sharply by 10.97% to 105,500 won ($89.57) per unit.

Hyundai Heavy marks the first case of IPO in the shipbuilding sector in two decades after DSME’s 2001 listing. Its IPO shares were oversubscribed by 405 times. But analysts say that Hyundai Heavy failed to reach its price ceiling on the first trading day as it has almost no presence in the fast-growing metaverse and artificial intelligence sectors.

Plus, the global shipbuilding market is still in recession. The amount of new shipbuilding orders dropped sharply from $264 billion in 2007 to $137 billion in 2013, and even lower to $49 billion last year. The number of players in the market also dropped from 211 to 44 companies over the past decade. Hyundai Heavy Industries also recorded an operating loss of 394 billion won ($334 million) during the first half of this year.

Market analysts highlight that the industry will rebound over the next five years, with more shipbuilding orders being placed since the outbreak of coronavirus and higher prices of the ships.

Moreover, the toughening regulations of the International Maritime Organization (IMO) to control carbon emissions offer a positive momentum for Hyundai Heavy. The regulation will drive the demand for eco-friendly ships by the global clients. Hyundai Heavy is among the few companies in the world that can make greener ships in high quality.

Another positive factor to note is that the three major Korean shipyards including Hyundai Heavy have signed a $19 billion LNG fleet deal with Qatar Petroleum. When a formal contract is signed within this year, the company’s shares are likely to be driven further up.

Write to Sung-mi Shim at smshim@hankyung.com

Daniel Cho edited this article.

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