[Practical Finance] IPO Fever Continues Despite Volatile Stock Market

Liquidity Indicator of IPO Market 'Solid'
Q2's 'Biggest Catch' HD Hyundai Marine Solutions
Also Interest in Mintech and Jeil M&S

While major stock markets around the world are showing a correction trend, interest in the initial public offering (IPO) market remains strong. Since the financial authorities expanded the price fluctuation range on the first day of listing, the expected returns on public offering investments have increased. As a result, competition for subscription to public offerings is fierce. In the second quarter of this year, companies such as Jeil M&S, Mintech, D&D Pharmatech, Cochip, and HD Hyundai Marine Solutions are planning to go public.

According to the financial investment industry on the 17th, as of the end of last month, investor deposit funds amounted to approximately 56.5 trillion won, an increase of 11.7% compared to the same period last year. During the same period, the balance of comprehensive asset management accounts (CMA) recorded 80.5 trillion won, up 28.5%.

Park Sera, a researcher at Daishin Securities, explained, "Both investor deposit funds and CMA balances are maintaining a continuous upward trend," adding, "Liquidity in public offerings is increasing."

Since the beginning of this year, the cumulative subscription deposits in the IPO market have reached about 88 trillion won, 2.4 times higher than the same period last year. APR and Samhyun, which went public this year, recorded subscription deposits of 14 trillion won and 12.3 trillion won, respectively. Inix and Hyundai Hims also attracted deposits around 10 trillion won. The average market return on the first day of listing compared to the public offering price for newly listed companies reached 168.0%. The proportion of companies whose market price rose compared to the public offering price was 100%.

The large-scale IPO expected in the second quarter is HD Hyundai Marine Solutions, with an estimated market capitalization of approximately 3.3 trillion to 3.7 trillion won based on the desired public offering price range. The expected public offering amount is about 652.4 billion to 742.3 billion won.

HD Hyundai Marine Solutions was established as an independent corporation in 2016 to respond to the demand for aftermarket (AM) services for ships. In line with the eco-friendly trend such as ship decarbonization and digitalization, it has gradually expanded its business areas from existing ship AM business to eco-friendly retrofitting and digital solutions. The largest shareholder is HD Hyundai, with an expected stake of 55.8% after the public offering.

Sales increased from 240.3 billion won in 2017 to 1.4305 trillion won last year. Since its launch, it has recorded an average annual growth rate of 35%. Last year, it achieved an operating profit of 201.5 billion won and a net profit of 151.1 billion won.

HD Hyundai Marine Solutions plans to use the funds raised through the IPO for mid- to long-term growth, such as strengthening its overseas network and research and development. It aims to strengthen its brand position in the ship AM market, expand capabilities in eco-friendly retrofitting business, and advance the ship digital business.

The demand forecast will be conducted over five business days until the 22nd, and the public offering price will be finalized. Subscription for general investors will take place over two days from the 25th to the 26th.

Mintech and Jeil M&S are also considered stocks of interest among investors. Mintech is a developer of battery and energy storage system (ESS) inspection and diagnostic solutions. It is the only company in Korea to successfully commercialize third-generation battery diagnostic technology based on electrochemical impedance spectroscopy. It can diagnose battery status in real time. The total number of public offering shares is 3 million, with a desired public offering price range of 6,500 to 8,500 won. The expected market capitalization is approximately 158.4 billion to 207.1 billion won.

Park Jongseong, a researcher at Eugene Investment & Securities, explained, "As the secondary battery market grows, Mintech will steadily grow through strong partnerships," adding, "Commercialization of an on-the-go electric vehicle battery diagnostic system is also underway."

Jeil M&S has accumulated over 40 years of technology related to mixing equipment. Starting in the food and pharmaceutical sectors, it is expanding into secondary batteries, defense, and chemical business sectors. Its core competencies include ▲blade design capabilities ▲technology to mix all forms of materials ▲comprehensive engineering solution capabilities. Based on extensive experience with various materials over a long period, it has secured technology to mix all forms of materials such as liquids, powders, slurries, and gases. As of the end of last year, its order backlog recorded 303.3 billion won, an increase of 155% compared to the previous year. Last year's sales reached 143.2 billion won, up 131.4% year-on-year.

Yoon Cheolhwan, a researcher at Korea Investment & Securities, said, "Jeil M&S is expected to achieve sales of 279 billion won and operating profit of 21.7 billion won this year," adding, "This represents increases of 94.9% and 1130.3%, respectively, compared to last year." He added, "The estimates were made conservatively, reflecting the possibility of some delays in equipment delivery and installation within the year," and "Despite the conservative outlook, the scale growth will have a significant effect on improving the cost ratio."