APAC IPOs & Placements, Aequitas Research

Clarence Chu

APAC IPOs & Placements

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.

Equity Capital Markets

Hyundai Engineering   / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hyundai-engineering-co-ltd" target="_blank" data-smartkarma-citation="entities:33008:1" rel="noopener">Hyundai Engineering Co Ltd (HEC KS)</a> is looking to raise up to US$1bn in its upcoming Korea IPO.</li>
<li>Whilst the firm has a relatively high concentration of international orders in its backlog, 40% in 9M21, it has been on the down trend since 2016.</li>
<li>In this note, we discuss peer comparison, our assumptions and valuation against domestic and international peers.</li>
</ul>



Hyundai Engineering Co Ltd (HEC KS) is looking to raise up to US$1bn in its upcoming Korea IPO.
Whilst the firm has a relatively high concentration of international orders in its backlog, 40% in 9M21, it has been on the down trend since 2016.
In this note, we discuss peer comparison, our assumptions and valuation against domestic and international peers.


Hyundai Engineering Pre-IPO - Unjustifiable Premium to Most Domestic Peers

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>2021 has been a leapfrog year in terms of both major outbound and inbound M&amp;As in Korea.</li>
<li>Two of the biggest M&amp;A deals in 2021 include SK Hynix's acquisition of Intel's flash NAND and SSD business and Emart's purchase of Ebay Korea for $3 billion. </li>
<li>Some of the largest M&amp;A deals which could get completed in 2022 include Hanon Systems, Bodyfriend, Modern House, Hyundai LNG Shipping, and EMK.  </li>
</ul>


2021 has been a leapfrog year in terms of both major outbound and inbound M&amp;As in Korea.
Two of the biggest M&amp;A deals in 2021 include SK Hynix's acquisition of Intel's flash NAND and SSD business and Emart's purchase of Ebay Korea for $3 billion. 
Some of the largest M&amp;A deals which could get completed in 2022 include Hanon Systems, Bodyfriend, Modern House, Hyundai LNG Shipping, and EMK.  


Korea M&A Recap in 2021 - A Leapfrog Year

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.

<ul>
<li>The success of this IPO depends on whether Hyundai Engineering can present a growth story that can justify a valuation premium of up to twice that of the local peers.</li>
<li>Of course, Hyundai Engineering is indeed in an advantageous position compared to the local competitors because it can present synergies with Hyundai Motor Group affiliates.</li>
<li>However, it depends on how specific a picture of financial growth is presented, which will be a significant challenge for Hyundai Engineering as well.</li>
</ul>


The success of this IPO depends on whether Hyundai Engineering can present a growth story that can justify a valuation premium of up to twice that of the local peers.
Of course, Hyundai Engineering is indeed in an advantageous position compared to the local competitors because it can present synergies with Hyundai Motor Group affiliates.
However, it depends on how specific a picture of financial growth is presented, which will be a significant challenge for Hyundai Engineering as well.


Hyundai Engineering IPO: Offering Details, Valuation Issues, & Index Fast Entry

Daelim Industrial's BOD and shareholders agreed to spin-off the company into <a href="https://www.smartkarma.com/entities/dl-e-c-co-ltd" target="_blank" data-smartkarma-citation="entities:31375:1" rel="noopener">DL E&amp;C Co Ltd (375500 KS)</a> and <a href="https://www.smartkarma.com/entities/daelim-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:18095:1" rel="noopener">DL Co Ltd (000210 KS)</a> in December 2020. DL E&amp;C and DL Corp shares started trading again on 25 January 2021. DL E&amp;C and DL Corp's market caps are 2.45 trillion won and 1.08 trillion won, respectively as of 26 January 2021. The combined market caps of the two companies are 3.53 trillion won, up more than 20% from the pre-spin off levels. DL E&amp;C makes some of the best apartments in Korea and this is their bread and butter business. <div>Hyundai E&amp;C, GS E&amp;C, HDC Hyundai Development, and Daewoo E&amp;C are the most appropriate comps to DL E&amp;C. These four comps are currently trading at P/E (2021E) ratios 11.8x, 6.1x, 5.6x, and 6.9x, respectively, using the consensus earnings estimates. The average P/E ratio of these four companies is 7.6x. If we apply 7.6x P/E on the estimated net profit of 660 billion won, this would suggest an implied market cap of 5.0 trillion won, which would be nearly 100% upside from the current market cap of 2.4 trillion won. If we use the lowest P/E multiple of the comps (5.6x) and apply to the estimated net profit of 660 billion won, this would suggest a market cap of 3.7 trillion won, which would be 51% higher than its current market cap. </div>

Daelim Industrial's BOD and shareholders agreed to spin-off the company into DL E&amp;C Co Ltd (375500 KS) and DL Co Ltd (000210 KS) in December 2020. DL E&amp;C and DL Corp shares started trading again on 25 January 2021. DL E&amp;C and DL Corp's market caps are 2.45 trillion won and 1.08 trillion won, respectively as of 26 January 2021. The combined market caps of the two companies are 3.53 trillion won, up more than 20% from the pre-spin off levels. DL E&amp;C makes some of the best apartments in Korea and this is their bread and butter business. Hyundai E&amp;C, GS E&amp;C, HDC Hyundai Development, and Daewoo E&amp;C are the most appropriate comps to DL E&amp;C. These four comps are currently trading at P/E (2021E) ratios 11.8x, 6.1x, 5.6x, and 6.9x, respectively, using the consensus earnings estimates. The average P/E ratio of these four companies is 7.6x. If we apply 7.6x P/E on the estimated net profit of 660 billion won, this would suggest an implied market cap of 5.0 trillion won, which would be nearly 100% upside from the current market cap of 2.4 trillion won. If we use the lowest P/E multiple of the comps (5.6x) and apply to the estimated net profit of 660 billion won, this would suggest a market cap of 3.7 trillion won, which would be 51% higher than its current market cap. 

Newly Spun-Off DL E&C and DL Corp Create Higher Value

Equity Bottom-Up

<ul>
<li>It was reported in Maekyung Daily News today that there could be a major deal in the works between Thailands CP Group and Korea's Lotte Group with regards to Lotte Group selling its 112 retail stores in China to the CP Group. Now, the CP Group is already in the final stages of negotiations to purchase<a href="https://www.smartkarma.com/entities/6993" target="_blank" data-smartkarma-citation="entities:6993:1">E Mart Inc (139480 KS)</a>'s China business (5 stores). <a href="https://www.smartkarma.com/entities/2338" target="_blank" data-smartkarma-citation="entities:2338:1">Lotte Shopping Co (023530 KS)</a> shares were up 8.4% on Friday, driven by its plans to exit the China business. </li>
<li>So basically, E Mart and Lotte have…</li>
</ul>


It was reported in Maekyung Daily News today that there could be a major deal in the works between Thailands CP Group and Korea's Lotte Group with regards to Lotte Group selling its 112 retail stores in China to the CP Group. Now, the CP Group is already in the final stages of negotiations to purchaseE Mart Inc (139480 KS)'s China business (5 stores). Lotte Shopping Co (023530 KS) shares were up 8.4% on Friday, driven by its plans to exit the China business. 
So basically, E Mart and Lotte have…


A Major Deal in the Works Between the CP Group and the Lotte Group for Lotte's China Business?

South Korea

Daewoo Engineering & Construction Co., Ltd. is a general engineering constructor.  The Company's projects include architectural works, such as commercial buildings, public facilities, schools, hospitals, and civil works, such as highways, ports, tunnels, railways, and dams.  Daewoo Engineering & Construction also constructs power plants, and residential buildings.

Daewoo Engineering & Construction (047040 KS)

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Daewoo Engineering & Construction (047040 KS)

Hyundai Engineering Pre-IPO - Unjustifiable Premium to Most Domestic Peers

Hyundai Engineering Co Ltd (HEC KS) is looking to raise up to US$1bn in its upcoming Korea IPO. In this note, we discuss peer comparison, our...

Clarence Chu

Korea M&A Recap in 2021 - A Leapfrog Year

2021 has been a leapfrog year in terms of major M&As in Korea. Some of the largest M&A deals in 2022 could include Hanon Systems, Bodyfriend,...

Douglas Kim

Hyundai Engineering IPO: Offering Details, Valuation Issues, & Index Fast Entry

Hyundai Engineering, another big fish in Korea's local IPO market, put out its listing prospectus. The company offers 16M shares, representing...

Sanghyun Park

Newly Spun-Off DL E&C and DL Corp Create Higher Value

The newly spun off DL E&C and DL Corp have created higher value for the shareholders in the past month.Their combined market caps are 3.5 trillion...

Douglas Kim

A Major Deal in the Works Between the CP Group and the Lotte Group for Lotte's China Business?

It was reported in Maekyung Daily News today that there could be a major deal in the works between Thailands CP Group and Korea's Lotte Group with...

Douglas Kim

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