Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p>Our NAV analysis of <a href="https://www.smartkarma.com/entities/hanwha-corporation" target="_blank" data-smartkarma-citation="entities:10619:1" rel="noopener">Hanwha Corporation (000880 KS)</a> suggests NAV of 3,845 billion won (51,298 won per share). This represents a 62% upside from the current price of 31,600 won. The biggest component of the company's value is its investments in other Hanwha Group related companies. Hanwha Corp's 37% stake in Hanwha Solution is worth 3.3 trillion won, which represents 60% of the value of the company (pre-holdco discount).</p><p>With the resumption of the partial short selling of Korean stocks on May 3rd, more hedge funds and other active investors will likely to employ pair trade strategies involving holdcos and opcos in Korea. The pair between Hanwha Corp and Hanwha Solution is the one which have shown one of widest gaps in share price performance in the past year. In our view, there is a good chance that this price gap narrows between Hanwha Corp and Hanwha Solution in the coming months.</p>

Our NAV analysis of Hanwha Corporation (000880 KS) suggests NAV of 3,845 billion won (51,298 won per share). This represents a 62% upside from the current price of 31,600 won. The biggest component of the company's value is its investments in other Hanwha Group related companies. Hanwha Corp's 37% stake in Hanwha Solution is worth 3.3 trillion won, which represents 60% of the value of the company (pre-holdco discount).With the resumption of the partial short selling of Korean stocks on May 3rd, more hedge funds and other active investors will likely to employ pair trade strategies involving holdcos and opcos in Korea. The pair between Hanwha Corp and Hanwha Solution is the one which have shown one of widest gaps in share price performance in the past year. In our view, there is a good chance that this price gap narrows between Hanwha Corp and Hanwha Solution in the coming months.

Our NAV Analysis of Hanwha Corp and A Pair Trade with Hanwha Solution

<div class="content-highlight"><p>In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the ban on the short selling of shares in Korea in May. In this insight, we highlight 26 pair trades that involve Korean holdcos and opcos.</p></div><p>Just a reminder that the ban on short selling of KOSPI 200 and KOSDAQ 150 included stocks will remain in place until May 2nd and investors will be able to resume their shorting on these 350 stocks starting on May 3rd. Once this ban on short selling of stocks ends, there could be more investors that may look to add to the holdco shares and short the opco shares (especially among the pairs where the holdco shares have underperformed the opco shares in the past year). However, some of these moves have already started to take place in the past few weeks, which could reduce the overall profits on the pair trades. </p><p>Traditionally, the pair trades involving Korean holdcos and opcos have been a trading strategy that many hedge funds have employed for many years. However, the ban on short selling of stocks in Korea have prevented many of these funds from employing these pair trade strategies. Once the ban ends, you will likely see these funds becoming more active in these trading methods once again. </p><div class="content-highlight">
<p>In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past year. Of the 26 pair trade strategies mentioned in this insight, this section I involves 19 of them (73% of total). The section II (which involve holdcos outperforming the opcos in the past year) involves 7 pair trade strategies (27% of total).</p>
<p>In other words, the opcos in general have vastly outperformed the holdcos in the past year, especially due to the ban on the short selling of stocks in Korea. Because the opcos tend to be the bigger company than the holdcos in terms of market cap, many fund managers (both active and passive) have tended to just invest in the opcos and pay less attention to the holdcos.  </p>
</div><p>Also, we described the holdcos as either regular or quasi. SK Telecom and Samsung C&amp;T would be examples of "quasi" holdcos whereas Orion Holdings and Hanjin Kal would be examples of regular holdcos. </p>

In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the ban on the short selling of shares in Korea in May. In this insight, we highlight 26 pair trades that involve Korean holdcos and opcos.Just a reminder that the ban on short selling of KOSPI 200 and KOSDAQ 150 included stocks will remain in place until May 2nd and investors will be able to resume their shorting on these 350 stocks starting on May 3rd. Once this ban on short selling of stocks ends, there could be more investors that may look to add to the holdco shares and short the opco shares (especially among the pairs where the holdco shares have underperformed the opco shares in the past year). However, some of these moves have already started to take place in the past few weeks, which could reduce the overall profits on the pair trades. Traditionally, the pair trades involving Korean holdcos and opcos have been a trading strategy that many hedge funds have employed for many years. However, the ban on short selling of stocks in Korea have prevented many of these funds from employing these pair trade strategies. Once the ban ends, you will likely see these funds becoming more active in these trading methods once again. 
In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past year. Of the 26 pair trade strategies mentioned in this insight, this section I involves 19 of them (73% of total). The section II (which involve holdcos outperforming the opcos in the past year) involves 7 pair trade strategies (27% of total).
In other words, the opcos in general have vastly outperformed the holdcos in the past year, especially due to the ban on the short selling of stocks in Korea. Because the opcos tend to be the bigger company than the holdcos in terms of market cap, many fund managers (both active and passive) have tended to just invest in the opcos and pay less attention to the holdcos.  
Also, we described the holdcos as either regular or quasi. SK Telecom and Samsung C&amp;T would be examples of "quasi" holdcos whereas Orion Holdings and Hanjin Kal would be examples of regular holdcos. 

Closing the Gap: Korean Holdcos Vs. Opcos

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Equity Capital Markets

Hanwha Solutions / Equity Capital Markets

<p>Hanwha Solutions became the latest one in Korea to leverage the hyper liquid stock market.</p><p>It announced a ₩1.2T offering at a 19.5% capital increase.</p><p>20% goes to the ESPO, so the per-share allocation for stockholders sits at 0.1565.</p><p>This event has a longer schedule than usual due to two holidays, the new year and Seollal (lunar new year).</p><p>Oversubscription is 20%, and five local bankers will be serving as an underwriter, mainly due to the offering size.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Overview"}'>Overview</td></tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Issuer"}'>Issuer</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"Hanwha Solutions Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Hanwha Solutions Corp</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"009830"}' data-sheets-formula='="009830"'>009830</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Target"}'>Target</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"Pubic offering of forfeited shares after offering to stockholders"}'>A public offering of forfeited shares after offering to stockholders</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Transferability"}'>Transferability</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"Renounceable"}'>Renounceable</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Volume"}'>Volume</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":31414000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>31,414,000</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Bonus issue volume"}'>Bonus issue volume</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>0</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Preliminary price"}'>Preliminary price</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":38200}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩38,200</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Preliminary value"}'>Preliminary value</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":1200014800000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]*R[-1]C[0]">₩1,200,014,800,000</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Oversubscription privilege"}'>Oversubscription privilege</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>20.00%</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"NH, KIS, Mirae Asset, KB, &amp; Daishin"}'>NH, KIS, Mirae Asset, KB, &amp; Daishin</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":" - Underwriting type"}'>- Underwriting type</td>
<td style="text-align: left; width: 350.909px;" data-sheets-value='{"1":2,"2":"Standby"}'>Standby</td>
</tr>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Allocation"}'>Allocation</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Common"}'>Common</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":159864497}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[-13]C[0], "shares")'>159,864,497</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Pref (incl. RCPS &amp; CPS)"}'>Pref (incl. RCPS &amp; CPS)</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":1123737}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,123,737</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares"}'>Total shares</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":160988234}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-2]C[0]+R[-1]C[0]">160,988,234</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":400000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>400,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares ex treasury shares"}'>Total shares ex treasury shares</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":160588234}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">160,588,234</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offer volume"}'>Offer volume</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":31414000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">31,414,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Common"}'>- Common</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":31414000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-16]C[0]">31,414,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Pref"}'>- Pref</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Per-share allocation"}'>Per-share allocation</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.15649465327578108}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000"}' data-sheets-formula="=R[8]C[0]/R[-4]C[0]">0.15649</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase"}'>Capital increase</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.19513227283429918}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-4]C[0]/R[-7]C[0]">19.51%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.16327253248005427}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-5]C[0]/(R[-8]C[0]+R[-5]C[0])">16.33%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares after rights offer"}'>Total shares after rights offer</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":192402234}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">192,402,234</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Common"}'>- Common</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":191278497}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-12]C[0]+R[-7]C[0]">191,278,497</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Pref"}'>- Pref</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":1123737}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-12]C[0]">1,123,737</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP allocation"}'>ESOP allocation</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":6282800}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>6,282,800</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-10]C[0]">20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder allocation"}'>Stockholder allocation</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":25131200}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-11]C[0]-R[-2]C[0]">25,131,200</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":0.8}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-12]C[0]">80.00%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Timetable"}'>Timetable</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44186}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2020. 12. 21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary pricing"}'><strong>Preliminary pricing</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44210}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 1. 14</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights date"}'><strong>Ex-rights date</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44214}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 1. 18</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date"}'>Record date</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44215}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 1. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade beginning"}'>Subscription rights trade beginning</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44232}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 2. 5</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade ending"}'>Subscription rights trade ending</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44242}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 2. 15</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final pricing"}'><strong>Final pricing</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44246}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 2. 19</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder subscription"}'>Stockholder subscription</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44251}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 2. 24</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Public subscription"}'>Public subscription</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44257}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 3. 2</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44260}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 3. 5</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44273}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 3. 18</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The discount is 15%, less than the usual 20%.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="400">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1st round"}'>1st round</td>
<td data-sheets-value='{"1":2,"2":"RP × (1 - 15%) / [1 + (19.51% × 15%)]"}' data-sheets-formula='="RP × (1 - "&amp;(R[11]C[0]*100&amp;"%")&amp;") / [1 + ("&amp;(R[12]C[0]*100&amp;"%"&amp;" × "&amp;(R[11]C[0]*100&amp;"%"&amp;")]"))'>RP × (1 - 15%) / [1 + (19.51% × 15%)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]"}'>Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44210}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[34]C[0]">2021. 1. 14</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights base price"}'>Ex-rights base price</td>
<td data-sheets-value='{"1":2,"2":"[RP + (1st × 19.51%)] / (1 + 19.51%)"}' data-sheets-formula='="[RP + (1st × "&amp;R[9]C[0]*100&amp;"%"&amp;")] / (1 + "&amp;R[9]C[0]*100&amp;"%"&amp;")"'>[RP + (1st × 19.51%)] / (1 + 19.51%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Previous close"}'>Previous close</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44214}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[32]C[0]">2021. 1. 18</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2nd round"}'>2nd round</td>
<td data-sheets-value='{"1":2,"2":"RP × (1 - 15%)"}' data-sheets-formula='="RP × (1 - "&amp;(R[5]C[0]*100&amp;"%")&amp;")"'>RP × (1 - 15%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP)]"}'>Min [Close, Avg (Close, 1W VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44246}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[33]C[0]">2021. 2. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final"}'>Final</td>
<td data-sheets-value='{"1":2,"2":"Max [Min (1st, 2nd), 3D VWAP × 60%]"}'>Max [Min (1st, 2nd), 3D VWAP × 60%]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td data-sheets-value='{"1":3,"3":44246}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}' data-sheets-formula="=Terms!R[31]C[0]">2021. 2. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount rate"}'><strong>Discount rate</strong></td>
<td data-sheets-value='{"1":3,"3":0.15}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>15.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'>Capital increase rate</td>
<td data-sheets-value='{"1":3,"3":0.19509999999999997}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=LEFT(Terms!R[11]C[0],6)*100/100">19.51%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

Hanwha Solutions became the latest one in Korea to leverage the hyper liquid stock market.It announced a ₩1.2T offering at a 19.5% capital increase.20% goes to the ESPO, so the per-share allocation for stockholders sits at 0.1565.This event has a longer schedule than usual due to two holidays, the new year and Seollal (lunar new year).Oversubscription is 20%, and five local bankers will be serving as an underwriter, mainly due to the offering size.





Overview

Issuer
Hanwha Solutions Corp


Ticker
009830


Target
A public offering of forfeited shares after offering to stockholders


Transferability
Renounceable


Volume
31,414,000


Bonus issue volume
0


Preliminary price
₩38,200


Preliminary value
₩1,200,014,800,000


Oversubscription privilege
20.00%


Banker
NH, KIS, Mirae Asset, KB, &amp; Daishin


- Underwriting type
Standby

Source: DART







Allocation

Common
159,864,497


Pref (incl. RCPS &amp; CPS)
1,123,737


Total shares
160,988,234


Treasury shares
400,000


Total shares ex treasury shares
160,588,234


Offer volume
31,414,000


- Common
31,414,000


- Pref
0


Per-share allocation
0.15649


Capital increase
19.51%


Dilution
16.33%


Total shares after rights offer
192,402,234


- Common
191,278,497


- Pref
1,123,737


ESOP allocation
6,282,800


- %
20.00%


Stockholder allocation
25,131,200


- %
80.00%

Source: DART







Timetable

BOD meeting
2020. 12. 21


Preliminary pricing
2021. 1. 14


Ex-rights date
2021. 1. 18


Record date
2021. 1. 19


Subscription rights trade beginning
2021. 2. 5


Subscription rights trade ending
2021. 2. 15


Final pricing
2021. 2. 19


Stockholder subscription
2021. 2. 24


Public subscription
2021. 3. 2


Payment
2021. 3. 5


Listing
2021. 3. 18

Source: DART

The discount is 15%, less than the usual 20%.





Pricing

1st round
RP × (1 - 15%) / [1 + (19.51% × 15%)]


- Reference price (RP)
Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]


- Reference date
2021. 1. 14


Ex-rights base price
[RP + (1st × 19.51%)] / (1 + 19.51%)


- Reference price (RP)
Previous close


- Reference date
2021. 1. 18


2nd round
RP × (1 - 15%)


- Reference price (RP)
Min [Close, Avg (Close, 1W VWAP)]


- Reference date
2021. 2. 19


Final
Max [Min (1st, 2nd), 3D VWAP × 60%]


- Reference date
2021. 2. 19


Discount rate
15.00%


Capital increase rate
19.51%

Source: DART



Hanwha Solutions ₩1.2T Rights Offer: Terms & Trade Approach

Equity Bottom-Up

<p>This is an update to our report <a href="https://www.smartkarma.com/insights/a-surge-in-value-of-nikola-corp-tesla-of-hydrogen-trucks-a-merger-of-hanwha-corp-h-solutions" target="_blank" data-smartkarma-citation="insights:40177" rel="noopener">A Surge in Value of Nikola Corp - 'Tesla' of Hydrogen Trucks: A Merger of Hanwha Corp &amp; H-Solutions?</a> (9 June 2020). Since then, <a href="https://www.smartkarma.com/entities/hanwha-solutions" target="_blank" data-smartkarma-citation="entities:8656:1" rel="noopener">Hanwha Solutions (009830 KS)</a>'s shares are up 69%.</p><p><strong>On 16 August, it was<a href="https://n.news.naver.com/article/015/0004399417?cds=news_edit" target="_blank" rel="noopener"> announced</a> that Hanwha General Chemical (36% owned by Hanwha Solutions) has secured the rights to operate 1,200 hydrogen charging stations for Nikola in North America. </strong>Overall, the Hanwha Group will play a big role in the overall value chain of the partnership between Nikola for the hydrogen ecosystem involving hydrogen production, storage, charging, and operation of the hydrogen charging stations.</p><div><p><strong>Overall, we like what the company is trying to do in trying to become a one-stop-shop provider of hydrogen-based infrastructure. We think that in the near-term with the announcement of the Hanwha Group securing the rights of 1,200 hydrogen charging stations, this will have a positive boost on Hanwha Solutions and that it could reach nearly 37,000 won per share (about 20% upside from current levels) which would represent 1.0x P/B.  </strong></p></div>

This is an update to our report A Surge in Value of Nikola Corp - 'Tesla' of Hydrogen Trucks: A Merger of Hanwha Corp &amp; H-Solutions? (9 June 2020). Since then, Hanwha Solutions (009830 KS)'s shares are up 69%.On 16 August, it was announced that Hanwha General Chemical (36% owned by Hanwha Solutions) has secured the rights to operate 1,200 hydrogen charging stations for Nikola in North America. Overall, the Hanwha Group will play a big role in the overall value chain of the partnership between Nikola for the hydrogen ecosystem involving hydrogen production, storage, charging, and operation of the hydrogen charging stations.Overall, we like what the company is trying to do in trying to become a one-stop-shop provider of hydrogen-based infrastructure. We think that in the near-term with the announcement of the Hanwha Group securing the rights of 1,200 hydrogen charging stations, this will have a positive boost on Hanwha Solutions and that it could reach nearly 37,000 won per share (about 20% upside from current levels) which would represent 1.0x P/B.  

Hanwha General Chemical Secures Rights for 1,200 Hydrogen Charging Stations in North America

<p>Nikola announced that it will start to receive reservations for the sales of its main trucks 'Badge' from the end of June. In November 2018, the Hanwha Group invested $100 million (120 billion won) in Nikola Corp for a 6.1% stake. Currently, a 6.1% stake in Nikola is worth $1.6 billion. The Hanwha Group has hit a home run in its investment in Nikola as its stake in value has surged 16x in one and a half years.  </p><div class="content-highlight"><p><em>The sharp increase in the value of Nikola Corp could result in a merger of H-Solution and <a href="https://www.smartkarma.com/entities/hanwha-corporation" target="_blank" data-smartkarma-citation="entities:10619:1" rel="noopener">Hanwha Corporation (000880 KS)</a>, which could reduce the long-awaited risks about the transfer of the ownership of the Hanwha Group from the Chairman to his sons and also improve the overall transparency of the Hanwha Group.</em></p></div><p>Among the Hanwha Group's public companies, Hanwha Solution and Hanwha Corp have indirect investment stake in the Nikola Corp. If we multiply 6.13% x 50% x 36%, this would be only 1.1% which would be Hanwha Solution's investment stake in Nikola Corp. Currently, a 1.1% stake in Nikola Corp is worth $290 million. So a key question is, <em>"From the end of April 2020 to June 9th, 2020, Hanwha Solution's market cap increased by 26% (608 billion won) and how much of this was due to the rapid rise in the value of Nikola Corp?" </em>One could argue that a good portion of this increase was due to the sharp appreciation of Nikola Corp shares and the other main factor is the increased investors' confidence that COVID-19 could be controlled which has renewed investors' enthusiasm in stocks. </p>

Nikola announced that it will start to receive reservations for the sales of its main trucks 'Badge' from the end of June. In November 2018, the Hanwha Group invested $100 million (120 billion won) in Nikola Corp for a 6.1% stake. Currently, a 6.1% stake in Nikola is worth $1.6 billion. The Hanwha Group has hit a home run in its investment in Nikola as its stake in value has surged 16x in one and a half years.  The sharp increase in the value of Nikola Corp could result in a merger of H-Solution and Hanwha Corporation (000880 KS), which could reduce the long-awaited risks about the transfer of the ownership of the Hanwha Group from the Chairman to his sons and also improve the overall transparency of the Hanwha Group.Among the Hanwha Group's public companies, Hanwha Solution and Hanwha Corp have indirect investment stake in the Nikola Corp. If we multiply 6.13% x 50% x 36%, this would be only 1.1% which would be Hanwha Solution's investment stake in Nikola Corp. Currently, a 1.1% stake in Nikola Corp is worth $290 million. So a key question is, "From the end of April 2020 to June 9th, 2020, Hanwha Solution's market cap increased by 26% (608 billion won) and how much of this was due to the rapid rise in the value of Nikola Corp?" One could argue that a good portion of this increase was due to the sharp appreciation of Nikola Corp shares and the other main factor is the increased investors' confidence that COVID-19 could be controlled which has renewed investors' enthusiasm in stocks. 

A Surge in Value of Nikola Corp - 'Tesla' of Hydrogen Trucks: A Merger of Hanwha Corp & H-Solutions?

South Korea

Hanwha Corporation imports and exports petrochemicals, machinery, automotives, electronics, and steel.  The Company also produces explosives for the defense and construction industries.  In addition, Hanwha manufactures automotive airbag inflators and telecommunication equipment, such as wireless phones and provides financial services through its subsidiaries.

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Hanwha Corporation (000880 KS)

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