The author is an analyst for NH Investment & Securities. He can be reached at esshim@nhqv.com -- Ed.
After a large stake selloff by a strategic collaborative client, Suresofttech’s share price has slid amid worsened investor sentiment. But, we expect the collaboration to continue, with steady earnings growth as a result.
Share price plunges on concerns over major stake selloff and potential additional release
On Sep 5, Hyundai Motors, a major customer and second-largest stakeholder in Suresofttech, sold off half of its holdings (3.85mn shares out of 7.7mn shares (14.91% ownership)) via an after-hours block deal. The amount represents the entire portion of shares that were released from the lock-up period since Suresofttech went public four months ago. The remaining stake had been under a six-month lock-up period, but that has now ended.
With investor sentiment having worsened due to the large-scale selloff by a strategic collaborative customer, there are concerns that additional shares may be released. However, we point out that Suresofttech’s business is sailing along smoothly without any major setbacks, regardless of share price. We anticipate that the collaboration with Hyundai Motors will continue going forward. And, Suresofttech’s role in Hyundai Motor Group's transition to a software-defined vehicle (SDV; software-centric cars) system is expected to expand further. Moreover, supply to Chinese clients has now started, and sales to the defense/aerospace and energy payers are rising steadily.
Mobigen acquisition to foster external growth and synergies
In August, Suresofttech acquired a 43.75% stake in Mobigen (held by Jiransecurity and Premier Partners) for approximately W22.9bn. To secure the acquisition funds, it issued convertible bonds worth W15bn. Of note, Mobigen is a big data AI player that mainly engages in the collection and analysis of mobile and automotive-related traffic packets. Moving ahead, Suresofttech anticipates accompanying business expansion and embedded system data-related synergies. Considering acquisition effects, the firm has slightly boosted its earnings guidance. Given such, we advise investors to focus on fundamentals and likely earnings growth rather than supply concerns.