KB Securities adjusted its target price per Hyundai Heavy Industries share from 175,000 won to 195,000 won (US$148 to US$165) on March 13, adding, “The group will be split into six companies on April 1 and then the divisions unrelated to but currently negatively affected by its shipbuilding division will be able to avoid undervaluation.”
The Hyundai Heavy Industries Group held an extraordinary shareholders' meeting on February 27 to approve of the spin-off plan. According to it, Hyundai Electric & Energy System, Hyundai Construction Machinery and Hyundai Robotics are scheduled to leave the group in which Hyundai Heavy Industries remains. Hyundai Heavy Industries Green Energy and Hyundai Global Service were separated from the group on an in-kind contribution basis late last year.
The group had to go through restructuring last year. However, shipbuilding market conditions are likely to become more and more favorable for Hyundai Heavy Industries this year and the companies that have been or will be separated from the group are expecting that they can become more aggressive in marketing, investment and R&D down the road.
The corporation remaining in the group and the other companies are listed with a new name and re-listed on May 10, respectively. Trading of Hyundai Heavy Industries Group shares is suspended on March 30. On May 10, the value that is obtained by multiplying the group’s final market cap by the ratio of distribution of net assets and dividing the result by the number of shares issued by each company is set as its base price and its opening price is set between 200% and 50% of the base price.
Investors are mulling over whether to keep or sell their shares before March 30. Corporate spin-offs for business specialization as in the case of the Hyundai Heavy Industries Group tend to lead to an upward stock price movement.
According to KB Securities, the appropriate total market cap of the four companies to be newly listed after the spin-off is approximately 15 trillion won (US$12.7 billion) and the value becomes 190,000 won to 200,000 won (US$161 to US$170) when divided by the number of shares. KB Securities recommended investors to refrain from buying the shares once the stock price reaches this level before the suspension of trading.