HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>The winners in the tension are the defense companies including <a href="https://www.smartkarma.com/entities/avic-shenyang-aircraft-co-ltd" target="_blank" data-smartkarma-citation="entities:12150:1" rel="noopener">Avic Shenyang Aircraft (600760 CH)</a>, <a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a> and <a href="https://www.smartkarma.com/entities/cssc-offshore-marine-engg-group-co-ltd" target="_blank" data-smartkarma-citation="entities:5089:1" rel="noopener">Cssc Offshore &amp; Marine Engg (317 HK)</a>. </li>
<li>Pelosi's Taiwan visit may ignite another round of nationalistic consumption. This will benefit <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning (2331 HK)</a> and <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports (2020 HK)</a> but is negative to <a href="https://www.smartkarma.com/entities/topsports-international" target="_blank" data-smartkarma-citation="entities:28153:1" rel="noopener">Topsports International (6110 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">SMIC (981 HK)</a> is a long-term beneficiary. There may be adverse spillover effects on Taiwanese companies like <a href="https://www.smartkarma.com/entities/tingyi-cayman-islands-holding-corp" target="_blank" data-smartkarma-citation="entities:14016:1" rel="noopener">Tingyi (322 HK)</a>, <a href="https://www.smartkarma.com/entities/want-want-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:355:1" rel="noopener">Want Want (151 HK)</a> and <a href="https://www.smartkarma.com/entities/uni-president-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14927:1" rel="noopener">Uni President China (220 HK)</a>. </li>
</ul>


The winners in the tension are the defense companies including Avic Shenyang Aircraft (600760 CH), AviChina Industry &amp; Technology H (2357 HK) and Cssc Offshore &amp; Marine Engg (317 HK). 
Pelosi's Taiwan visit may ignite another round of nationalistic consumption. This will benefit Li Ning (2331 HK) and Anta Sports (2020 HK) but is negative to Topsports International (6110 HK). 

SMIC (981 HK) is a long-term beneficiary. There may be adverse spillover effects on Taiwanese companies like Tingyi (322 HK), Want Want (151 HK) and Uni President China (220 HK). 


China-US Tension Escalation: Winners and Losers on Pelosi's Taiwan Visit

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyse the changes of A/H premium on 141 stocks over the last week.</li>
<li>Increase in the A-H premium in Utilities (+4.4ppt) and Real Estate (+2.1ppt) were offset by the decline of A-H premium in Consumer Discretionary (+6.1ppt) and Health Care (-2.1ppt) sectors.</li>
<li>We highlight A-H premium changes in COSCO Ship Eng, YOFC, CSSC Offshore, Shanghai Fudan, China Suntien.</li>
</ul>


We analyse the changes of A/H premium on 141 stocks over the last week.
Increase in the A-H premium in Utilities (+4.4ppt) and Real Estate (+2.1ppt) were offset by the decline of A-H premium in Consumer Discretionary (+6.1ppt) and Health Care (-2.1ppt) sectors.
We highlight A-H premium changes in COSCO Ship Eng, YOFC, CSSC Offshore, Shanghai Fudan, China Suntien.


A-H Premium Weekly: COSCO Ship Eng, YOFC, CSSC Offshore, Shanghai Fudan, China Suntien

<ul>
<li>We analyse the changes of A/H premium on 136 stocks over the last week.</li>
<li>Information technology and health care led the increases of A/H premium while consumer staple led the decreases of A/H premium. </li>
<li>We highlight A/H premium increases for Flat Glass, Cansino, and China Eastern Air. </li>
</ul>


We analyse the changes of A/H premium on 136 stocks over the last week.
Information technology and health care led the increases of A/H premium while consumer staple led the decreases of A/H premium. 
We highlight A/H premium increases for Flat Glass, Cansino, and China Eastern Air. 


A/H Premium Weekly: Flat Glass, Cansino, China Eastern Air

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

<h2><strong>Eight new names, SoftBank remains for the 3rd quarter running</strong></h2>
<ul>
<li>
<strong>Our</strong><strong>Q2-2021 All Cap High-Risk screen of stocks produced a market cap-weighted average price decline of 2%</strong>. In comparison, the MSCI Asia Pacific Index posted a decline of 1.7% over the same period. The stock quality of our Q2 2021 decreased 2.4 points or 3.8% over the period. Within the mix of 34 stocks in our Q2 2021 (May) list 19 posted negative performance, with an average decline of 14.1%.</li>
<li>
<strong>At a static number of 34</strong><strong> stocks our Q3 2021 screen, delivers an interesting composition this quarter, </strong>with eight (8) new names and strong representation from Hong Kong in terms of geography and Industrials and Basic Materials from a sector perspective. This suggests that the “reopening of the economy” trade may have run its course for now.</li>
<li><strong>Our Q3 2021 screen shows a further reduction in average stock rank (a reading on relative quality amongst the broad market peers with 100 being the highest) to 61 from 65.18 in Q2 2021.</strong></li>
<li>
<strong>Stock specific focus:</strong> We discuss why SoftBank stands out as a stock that presents with additional risk. We also discuss the fact that whilst there is a high representation of Industrials in the list, within this list, there are several names that may warrant not being too bearish towards.</li>
</ul>

Eight new names, SoftBank remains for the 3rd quarter running


OurQ2-2021 All Cap High-Risk screen of stocks produced a market cap-weighted average price decline of 2%. In comparison, the MSCI Asia Pacific Index posted a decline of 1.7% over the same period. The stock quality of our Q2 2021 decreased 2.4 points or 3.8% over the period. Within the mix of 34 stocks in our Q2 2021 (May) list 19 posted negative performance, with an average decline of 14.1%.

At a static number of 34 stocks our Q3 2021 screen, delivers an interesting composition this quarter, with eight (8) new names and strong representation from Hong Kong in terms of geography and Industrials and Basic Materials from a sector perspective. This suggests that the “reopening of the economy” trade may have run its course for now.
Our Q3 2021 screen shows a further reduction in average stock rank (a reading on relative quality amongst the broad market peers with 100 being the highest) to 61 from 65.18 in Q2 2021.

Stock specific focus: We discuss why SoftBank stands out as a stock that presents with additional risk. We also discuss the fact that whilst there is a high representation of Industrials in the list, within this list, there are several names that may warrant not being too bearish towards.


Screening the Silk Road: Q3 2021 High-Risk Names to Avoid

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

HD Korea Shipbuilding & Offshore Engineering / Equity Capital Markets

HD Korea Shipbuilding & Offshore Engineering

<div><div><h2>Offering size</h2></div></div><div><p>Hyundai Heavy Industries (HHI) offers 18M shares, which account for 25.43% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.</p></div><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Offering size"}'>Offering size</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"329180"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[1]C[-2]">329180</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}'>Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}'>KOSPI</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'><strong>Offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8654230}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>18,000,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of SO"}'><strong>- % of pre-IPO SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.25433386315786916}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[5]C[-2]"><strong>25.43%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Institutional allotment"}'><strong>- Institutional allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"55.00~75.00%"}' data-sheets-formula="=Terms!R[5]C[-2]"><strong>55.00~75.00%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><div class="content-highlight">
<p><strong>Who is HHI?</strong></p>
<ul>
<li>HHI is the world's largest shipbuilding company based in Korea. Since its establishment in 1973, it has maintained the No. 1 position in the global shipbuilding market since 1983.</li>
<li>Prior to the establishment of the holding company in 2017, Hyundai Heavy Industries was at the apex of a circular shareholding structure that led to Chung Mong-jun (owner) → Hyundai Heavy Industries → Hyundai Samho Heavy Industries → Hyundai Mipo Dockyard → Hyundai Heavy Industries.</li>
<li>In June 2019, Hyundai Heavy Industries conducted a physical division to take over Daewoo Shipbuilding &amp; Marine Engineering. It was divided into an intermediate holding company, Korea Shipbuilding &amp; Offshore Engineering (KSOE), and an operating company, Hyundai Heavy Industries. For this reason, KSOE currently owns 100% of HHI.</li>
</ul>
</div><div><div><h2>Split</h2></div></div><div>
<p>This IPO is a 100% primary offering. As a result, this offering will see a capital increase rate of 25.43% with a shareholding dilution of 20.28%. This event is free of any additional options: cornerstone, clawback, or greenshoe.</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":"Split"}'>Split</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Primary %"}'><strong>Primary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[3]C[-2]"><strong>100.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Secondary %"}'>Secondary %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[-2]">0.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'><strong>Capital increase rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.25433386315786916}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[-2]"><strong>25.43%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.20276408907399399}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[-2]">20.28%</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div><div><div></div></div><div>
<div><div><h2>Schedule</h2></div></div>
<div>
<p>The book opens on August 26 (September 2 for local institutions) and runs until September 3. The allotment will be on September 6, finalizing an offering price. The subscription falls on September 7.</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":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'><strong>Book open</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44434}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 08. 26</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44442}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 09. 03</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'><strong>Allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44445}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 09. 06</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'><strong>Subscription</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44446}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 09. 07</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44449}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 09. 10</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><div><h2>Pricing</h2></div></div>
<div><p>This IPO also uses PBR. The corporate value was determined after selecting the following five companies (one from Korea and four from China):</p></div>
<div><ol style="list-style-type: decimal;">
<li><a href="https://www.smartkarma.com/entities/daewoo-shipbuilding-marine-engineering" target="_blank" data-smartkarma-citation="entities:12531:1" rel="noopener">Daewoo Shipbuilding &amp; Marine Engineering (042660 KS)</a></li>
<li><a href="https://www.smartkarma.com/entities/china-shipbuilding-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:5789:1" rel="noopener">China Shipbuilding Industry (601989 CH)</a></li>
<li>
<a href="https://www.smartkarma.com/entities/china-cssc-holdings-ltd-a" target="_blank" data-smartkarma-citation="entities:2464:1" rel="noopener">China CSSC Holdings Ltd A (600150 CH)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/yangzijiang-shipbuilding-holdings-limited" target="_blank" data-smartkarma-citation="entities:660:1" rel="noopener">Yangzijiang Shipbuilding (YZJSGD SP)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/cssc-offshore-marine-engg-group-co-ltd" target="_blank" data-smartkarma-citation="entities:5089:1" rel="noopener">Cssc Offshore &amp; Marine Engg Group (317 HK)</a> </li>
</ol></div>
<div>
<p>The <strong>average P/B multiple</strong> of these five valuation peers come at <strong>1.12x</strong> based on their 1Q21 financials.</p>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"FY2021 1Q based annualized net earnings based P/E"}'>As of FY2021 1Q</td>
<td data-sheets-value='{"1":2,"2":"Note"}'>Note</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"DSME"}'>DSME</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"China Shipbuilding Industry Company Ltd"}'>China Shipbuilding Industry Company Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"China CSSC Holdings Ltd"}'>China CSSC Holdings Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Yangzijiang Shipbuilding Holdings Ltd"}'>Yangzijiang Shipbuilding Holdings Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"CSSC Offshore and Marine Engineering Group Co Ltd"}'>CSSC Offshore and Marine Engineering Group Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity"}'>Equity</td>
<td data-sheets-value='{"1":2,"2":"A"}'>A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3635.589}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩3,635.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15324.249}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩15,324.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9411.029}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩9,411.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6066.149}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩6,066.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3057.162}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩3,057.2B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Non controlling interest"}'>Non-controlling interest</td>
<td data-sheets-value='{"1":2,"2":"B"}'>B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩0.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":157.608}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩157.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1247.454}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩1,247.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.08}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩186.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":550.639}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩550.6B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Applied equity"}'>Applied equity</td>
<td data-sheets-value='{"1":2,"2":"C=A-B"}'>C=A-B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3635.589}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩3,635.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15166.641}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩15,166.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8163.575000000001}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩8,163.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5880.069}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩5,880.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2506.5229999999997}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">₩2,506.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference market cap"}'>Reference market cap</td>
<td data-sheets-value='{"1":2,"2":"D"}'>D</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3401.114}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩3,401.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15590.917}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩15,590.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11966.681}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩11,966.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4552.47}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩4,552.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3504.253}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩3,504.3B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'><strong>PBR</strong></td>
<td data-sheets-value='{"1":2,"2":"E=D÷C"}'><strong>E=D÷C</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.94}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>0.94x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.03}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>1.03x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.47}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>1.47x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.77}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>0.77x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.4}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>1.40x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average PBR"}'><strong>Average PBR</strong></td>
<td data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
<td colspan="5" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":1.12}' data-sheets-numberformat='[null,2,"0.00x"]'><strong>1.12x</strong></td>
</tr>
<tr><td colspan="7" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<p>The averaged P/B multiple of 1.12x was applied to HHI's equity of ₩5,035.7B from the second quarter of this year. Then, an IPO flow of ₩936.0B (at the lower end of the indicative price band) was added. As a result, we have <strong>a reference market cap of ₩6.58T</strong>, giving <strong>a price per share of ₩74,094</strong>.</p>
</div>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="3" style="width: 719.119px;" data-sheets-value='{"1":2,"2":"P/E valuation"}'>HHI: P/B valuation</td></tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Average PBR"}'>Average PBR</td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":1.12}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-4]C[0]">1.12x</td>
</tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Applied equity"}'><strong>Applied equity</strong></td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"B"}'><strong>B</strong></td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":5035.677}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><strong>₩5,035.7B</strong></td>
</tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"IPO inflow"}'><strong>IPO inflow</strong></td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"C"}'><strong>C</strong></td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":936}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><strong>₩936.0B</strong></td>
</tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Reference market cap"}'><strong>Reference market cap</strong></td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"D=(AxB)+C"}'><strong>D=(AxB)+C</strong></td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":6577.587}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'><strong>₩6,577.6B</strong></td>
</tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Post-IPO SO"}'>Post-IPO SO</td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"E"}'>E</td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":88773116}' data-sheets-numberformat='[null,2,"#,##0",1]'>88,773,116</td>
</tr>
<tr>
<td style="width: 239.702px;" data-sheets-value='{"1":2,"2":"Price per share"}'><strong>Price per share</strong></td>
<td style="width: 161.804px;" data-sheets-value='{"1":2,"2":"F=D÷E"}'><strong>F=D÷E</strong></td>
<td style="text-align: right; width: 317.614px;" data-sheets-value='{"1":3,"3":74094}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'><strong>₩74,094</strong></td>
</tr>
<tr><td colspan="3" style="width: 719.119px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<p>The <strong>indicative price band</strong> lies between <strong>₩52,000 and ₩60,000</strong>. This is obtained by applying a <strong>discount rate of</strong><strong>19.02% to 29.82%</strong> to the market cap of ₩6.58T calculated through PBR. This much discount gives a <strong>P/B multiple of 0.77x to 0.89x</strong>.</p>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'><strong>Price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":52000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩52,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":60000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩60,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":936}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩936.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1080}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩1,080.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Institutional allotment (55%)"}'>- Institutional allotment (55%)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":514.8000000000001}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-1]C[0]*55%">₩514.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":594}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-1]C[0]*55%">₩594.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'>Implied market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4616.202032}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-3]C[0]*R23C3/1000000000">₩4,616.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5326.38696}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula="=R[-3]C[0]*R23C3/1000000000">₩5,326.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'><strong>- Discount</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2981887872162388}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R24C3-R[-4]C[0])/R24C3"><strong>29.82%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1902178314033525}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R24C3-R[-4]C[0])/R24C3"><strong>19.02%</strong></td>
</tr>
<tr>
<td><strong>Implied PBR</strong></td>
<td style="text-align: right;"><strong>0.77x</strong></td>
<td style="text-align: right;"><strong>0.89x</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
</div>

Offering sizeHyundai Heavy Industries (HHI) offers 18M shares, which account for 25.43% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.





Offering size

Ticker
329180


Bourse
KOSPI


Offering
18,000,000


- % of pre-IPO SO
25.43%


- Institutional allotment
55.00~75.00%

Source: DART


Who is HHI?

HHI is the world's largest shipbuilding company based in Korea. Since its establishment in 1973, it has maintained the No. 1 position in the global shipbuilding market since 1983.
Prior to the establishment of the holding company in 2017, Hyundai Heavy Industries was at the apex of a circular shareholding structure that led to Chung Mong-jun (owner) → Hyundai Heavy Industries → Hyundai Samho Heavy Industries → Hyundai Mipo Dockyard → Hyundai Heavy Industries.
In June 2019, Hyundai Heavy Industries conducted a physical division to take over Daewoo Shipbuilding &amp; Marine Engineering. It was divided into an intermediate holding company, Korea Shipbuilding &amp; Offshore Engineering (KSOE), and an operating company, Hyundai Heavy Industries. For this reason, KSOE currently owns 100% of HHI.

Split
This IPO is a 100% primary offering. As a result, this offering will see a capital increase rate of 25.43% with a shareholding dilution of 20.28%. This event is free of any additional options: cornerstone, clawback, or greenshoe.






Split

Primary %
100.00%


Secondary %
0.00%


Capital increase rate
25.43%


Dilution
20.28%

Source: DART



Schedule

The book opens on August 26 (September 2 for local institutions) and runs until September 3. The allotment will be on September 6, finalizing an offering price. The subscription falls on September 7.






Schedule

Book open
2021. 08. 26


Book close
2021. 09. 03


Allotment
2021. 09. 06


Subscription
2021. 09. 07


Payment
2021. 09. 10


Listing
-

Source: DART


Pricing
This IPO also uses PBR. The corporate value was determined after selecting the following five companies (one from Korea and four from China):

Daewoo Shipbuilding &amp; Marine Engineering (042660 KS)
China Shipbuilding Industry (601989 CH)

China CSSC Holdings Ltd A (600150 CH) 

Yangzijiang Shipbuilding (YZJSGD SP) 

Cssc Offshore &amp; Marine Engg Group (317 HK) 


The average P/B multiple of these five valuation peers come at 1.12x based on their 1Q21 financials.












As of FY2021 1Q
Note
DSME
China Shipbuilding Industry Company Ltd
China CSSC Holdings Ltd
Yangzijiang Shipbuilding Holdings Ltd
CSSC Offshore and Marine Engineering Group Co Ltd


Equity
A
₩3,635.6B
₩15,324.2B
₩9,411.0B
₩6,066.1B
₩3,057.2B


Non-controlling interest
B
₩0.0B
₩157.6B
₩1,247.5B
₩186.1B
₩550.6B


Applied equity
C=A-B
₩3,635.6B
₩15,166.6B
₩8,163.6B
₩5,880.1B
₩2,506.5B


Reference market cap
D
₩3,401.1B
₩15,590.9B
₩11,966.7B
₩4,552.5B
₩3,504.3B


PBR
E=D÷C
0.94x
1.03x
1.47x
0.77x
1.40x


Average PBR
-
1.12x

Source: DART


The averaged P/B multiple of 1.12x was applied to HHI's equity of ₩5,035.7B from the second quarter of this year. Then, an IPO flow of ₩936.0B (at the lower end of the indicative price band) was added. As a result, we have a reference market cap of ₩6.58T, giving a price per share of ₩74,094.








HHI: P/B valuation

Average PBR
A
1.12x


Applied equity
B
₩5,035.7B


IPO inflow
C
₩936.0B


Reference market cap
D=(AxB)+C
₩6,577.6B


Post-IPO SO
E
88,773,116


Price per share
F=D÷E
₩74,094

Source: DART


The indicative price band lies between ₩52,000 and ₩60,000. This is obtained by applying a discount rate of19.02% to 29.82% to the market cap of ₩6.58T calculated through PBR. This much discount gives a P/B multiple of 0.77x to 0.89x.








Pricing
Low
High


Price
₩52,000
₩60,000


Base deal size
₩936.0B
₩1,080.0B


- Institutional allotment (55%)
₩514.8B
₩594.0B


Implied market cap
₩4,616.2B
₩5,326.4B


- Discount
29.82%
19.02%


Implied PBR
0.77x
0.89x

Source: DART





Hyundai Heavy Industries IPO: Offering Details & Valuation Issues

China

CSSC Offshore and Marine Engineering Group Company Limited manufactures and markets ships, containers, large steel structures, fiberglass boats, high-speed ships, and land use machines. The Company also offers ship polishing, repair and rental services.

Cssc Offshore & Marine Engg Group (317 HK)

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

Cssc Offshore & Marine Engg Group (317 HK)

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)