On the 28th, Samsung Electronics and 5 other companies participate in Samsung Heavy Industries' paid-in capital increase... Total investment of 233.5 billion KRW
Performance recovery expected following smooth order intake from 2023
[Asia Economy Reporter Gong Byung-sun] A Samsung affiliate has decided to participate in Samsung Heavy Industries' rights offering. However, securities firms predict that the future stock price depends on the company's performance.
According to the electronic disclosure system on the 30th, Samsung Heavy Industries announced on the 28th that Samsung Electronics, Samsung Life Insurance, and Samsung Electro-Mechanics will participate in the rights offering. In addition, Samsung SDI, Samsung C&T, and Cheil Worldwide will also participate. The total investment amount from the six affiliates is 233.5 billion KRW.
Samsung Heavy Industries plans to raise a total of 1.2825 trillion KRW through this rights offering. Since 250 million new shares will be issued, a decline in the stock price seems inevitable. Typically, rights offerings lead to a drop in stock prices, especially when the funds are used for financial structure improvement rather than business expansion. In fact, on the 28th, the day Samsung affiliates decided to participate in the rights offering, Samsung Heavy Industries' stock price fell by 1.09%.
Nevertheless, efforts to escape from a poor financial structure are being positively received by the market. The debt ratio, which exceeds 300%, is expected to fall to 230% after the rights offering. Institutions have net purchased about 4.3 billion KRW worth of Samsung Heavy Industries shares over two days, the 28th and 29th, following the news of Samsung affiliates' investment.
However, securities firms point out that Samsung Heavy Industries' stock price depends on future performance. It is still difficult to escape from losses. Due to poor orders last year, the deficit trend is expected to continue until 2022.
From 2023, performance is expected to improve somewhat along with smooth order intake this year. On the 25th, Samsung Heavy Industries secured orders for four liquefied natural gas (LNG) carriers worth 971.3 billion KRW, achieving a cumulative order performance of 11.2 billion USD (approximately 13.1488 trillion KRW) in the shipbuilding sector this year alone.
Hwang Eo-yeon, a researcher at Shinhan Financial Investment, explained, “It is expected to benefit from the increase in LNG carrier orders due to LNG supply shortages,” adding, “The stock price will begin to recover in earnest based on the LNG carrier order momentum after the listing of new shares from the rights offering.”
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