As Stock Market Faces Sharp Decline, the 'IPO Market' Heats Up

Offering Prices of 4 Companies Including Woojin Entec Exceed Upper Limit of Expected Range
Profitability May Decline if KOSDAQ Slump Continues

Although the KOSDAQ market continues to underperform, funds are flowing into the initial public offering (IPO) market. Preliminary listed companies that conducted demand forecasting, including Woojin Entec, HB Investment, POSBANK, and Hyundai Hims, all confirmed offering prices exceeding the upper limit of their expected price ranges. This is largely due to the sharp rise in stock prices of newly listed companies at the end of last year, which resulted in high returns on IPO investments.

According to the financial investment industry on the 18th, shipbuilding equipment manufacturer Hyundai Hims finalized its offering price at 7,300 KRW. This is at least 15.9% higher than the expected range (5,000 to 6,300 KRW) suggested by the lead underwriter, Mirae Asset Securities.

A total of 2,099 domestic and foreign institutional investors participated in the demand forecasting, recording a competition rate of 681 to 1. More than 9 out of 10 participating institutions proposed to acquire shares even at 7,500 KRW. The size of Hyundai Hims' offering increased from 54.9 billion KRW to 63.6 billion KRW.

Founded in 2008, Hyundai Hims is a manufacturer of ship blocks and ship interior materials. Major clients include HD Hyundai Heavy Industries and Hyundai Samho Heavy Industries, affiliates of the HD Hyundai Group. As of the third quarter of last year, the company achieved consolidated sales of 134.3 billion KRW and operating profit of 11.1 billion KRW.

Park Jong-sun, a researcher at Eugene Investment & Securities, explained, "Due to the International Maritime Organization (IMO)'s mid- to long-term greenhouse gas reduction plans, demand for ship replacement is expected to increase," adding, "Orders for liquefied natural gas (LNG) carriers are rising, and HD Hyundai Heavy Industries' orders are surging."

Prior to Hyundai Hims, Woojin Entec, HB Investment, and POSBANK also exceeded their expected offering prices in demand forecasting. Woojin Entec, which conducted demand forecasting over five business days starting from the 8th, recorded a competition rate of 1,263 to 1. A KB Securities official, the lead underwriter, said, "Woojin Entec presented reasonable targets based on a stable financial structure," and added, "Their preparation to enter the nuclear power plant dismantling market was also recognized."

Nuclear power plant maintenance company Woojin Entec is responsible for maintenance services of instrumentation and control equipment at nuclear and thermal power plants. Through government national projects, it is developing technology related to radiation measurement and monitoring systems. The company is also expected to seek business opportunities in the nuclear power plant dismantling market. Woojin Entec attracted subscription deposits of 3.7 trillion KRW from general investors during the public subscription. The subscription competition rate reached 2,707 to 1 after the two-day public subscription from the 16th to the 17th.

HB Investment, a first-generation domestic venture capital (VC), recorded a demand forecasting competition rate of 838 to 1 and confirmed a high offering price. The offering price was set at 3,400 KRW, more than 20% above the upper limit of the expected range of 2,800 KRW. An NH Investment & Securities official, responsible for the listing underwriting, explained, "Many investors highly evaluated HB Investment's differentiated competitiveness in terms of stability, profitability, and growth potential."

POSBANK, which supplies point-of-sale information management systems and kiosks, also confirmed an offering price of 18,000 KRW, exceeding the upper limit of the expected range by 20% through demand forecasting.

The reason why attention is focused on the IPO market regardless of the sluggish KOSDAQ market is interpreted as the sharp rise in stock prices of newly listed companies last year. Kim Su-yeon, a researcher at Hanwha Investment & Securities, said, "KNS, LS Materials, and DS Danseok rose up to 400% compared to their offering prices, which were the upper limit of the price range on their listing day," adding, "large-cap stocks such as Doosan Robotics and EcoPro BM continue to lead the IPO market with their upward trends."

However, some express concerns that if the KOSDAQ market continues to underperform, the stock price growth rate of newly listed companies may be lower than expected. There are also voices urging careful selection ahead of public subscriptions for general investors. A financial investment industry official explained, "Investor sentiment is shrinking as the KOSDAQ index has fallen for four consecutive days since the 12th," adding, "If the offering price rises, the expected return on the first day of listing may decrease." He further advised, "The industries of preliminary listed companies conducting demand forecasting this year are all different. Investors should decide whether to subscribe by considering growth potential and discount rates compared to peer industries."

Another official analyzed, "For the IPO market to grow steadily, the success of APR's listing next month, which aims for a market capitalization of 1.5 trillion KRW, is important," adding, "Conditions must be created for large-scale IPOs to continue pursuing listings."