Hyundai Heavy Industries' shares surged 86% on their first day of trading on the Korea Composite Stock Price Index (Kospi) on Friday.
The world’s largest shipbuilder raised KRW 1.1bn ($935m) from an initial public offering, much of which will fund investments in new technology to build greener vessels.
It was South Korea’s fifth-largest share offering this year, according to data compiled by Bloomberg.
The company issued 18m new shares at KRW 60,000 ($50.5) per share in an offering that was massively oversubscribed by institutional investors.
Demand from institutional investors was 1,836 times the number of shares on offer, the second highest for an IPO on Kospi, HHI said.
The move gives the Ulsan-based company a market capitalisation of about $4.5bn.
HHI will invest 70% of cash proceeds to develop eco ships, autonomous vessels, and hydrogen and ammonia-fuelled units.
The company will use the remaining 30% for debt repayment and working capital.
HHI’s management expects new global shipbuilding orders to record a 16% compound annual growth rate for the 2020 to 2025 period, mainly driven by replacement demand and environmental regulations.
Current orderbook
HHI’s current orderbook stands at 6.7m cgt, with LNG carrier orders accounting for 2.9m cgt, containership orders 2.1m cgt, and tankers and LPG carrier orders accounting for 0.9m cgt and 0.8m cgt, respectively, according to figures compiled by Japanese investment bank Nomura.
“Since the onset of the Covid-19 pandemic, the surge in containership rates has spread to ship orders, raising ship prices,” Meritz Securities analyst Kim Hyun was quoted as saying by Reuters.
“If stronger green regulations and testing of new fuels lead to increased demand for eco-friendly ships that replace older fleets, Hyundai, which makes both ships and engines, is well-placed to be competitive.”
Despite the heady post-IPO valuation and the strong newbuilding demand, particularly from the containership market, HHI has not reported a profit in the past three years.
The company lost KRW 423bn in the full year of 2018, KRW 51bn over 2019, KRW 431bn last year and posted a loss of KRW 351bn in the second quarter of 2021, according to figures compiled by analysts at Nomura.
Companies going public in South Korea have raised almost $16bn to date in 2021, which is already an annual record.
Mirae Asset Securities, Korea Investment & Securities and Credit Suisse Securities acted as co-managers for the IPO.
Korea Shipbuilding & Offshore Engineering, HHI’s parent company, saw its shares finish 11% lower on Friday. It retains an 80% stake in HHI following the IPO, down from 100%.
