[Reporter Reading Securities Report] Hanamicron, Largest Shareholder Participates Only 10% in 100 Billion Won Fundraising

Hanamicron Initiates Facility Investment and Debt Repayment through Rights Offering
Despite 100 Billion KRW in Cash Equivalents in Q1, Rights Offering Conducted
Chairman Choi Chang-ho Participates in Only 10% of Allocated Rights Offering Shares

Hanamicron is embarking on a large-scale fundraising effort amounting to 110 billion KRW. The company plans to use the raised funds to invest in facilities in the non-memory test (TEST) sector to respond to new orders. However, the fact that the largest shareholder, Chairman Choi Chang-ho, will subscribe to only 10% of the rights offering allocation is unlikely to be viewed positively by investors.

According to the financial investment industry on the 24th, Hanamicron will conduct a rights offering followed by a general public offering of forfeited shares. The total amount to be raised is 112.5 billion KRW. The newly issued shares will be 5 million shares, with a planned issue price of 22,500 KRW per share. The issue price will be finalized on July 24.

Hanamicron is a company that provides full turnkey semiconductor back-end process (OSAT) services, including bumping, wafer testing, packaging, final testing, and modules.

The raised funds will be used for facility investment (68.7 billion KRW), operating funds (18.7 billion KRW), and debt repayment (25 billion KRW).

The facility funds will be used for investment in test equipment. Through this, the company will expand production capacity (CAPA) and modify equipment in response to new orders for non-memory testing from customers. The company explained in the securities report, "The investment will be directed toward test equipment for AP products, which are key products in non-memory testing," and added, "We plan to respond to the increase in test volume due to the expansion of customers' smartphone market share and the increased adoption of in-house produced AP (Application Processor)."

The debt repayment funds will be fully used to repay the 10th series private bonds. Hanamicron issued private bonds worth 25 billion KRW in 2021. The maturity date of these bonds is November 29 of this year. By repaying, Hanamicron plans to reduce financial burdens while improving liquidity and financial stability indicators. Hanamicron's debt reliance increased from 39.42% in 2021 to 56.92% last year, and during the same period, the debt ratio rose from 134.39% to 188.61%, indicating a continuous decline in financial stability.

The remainder will be used to purchase raw materials used in the packaging process. Hanamicron expects memory demand in the second half of this year to more than double compared to the first half. The company is aiming to secure raw materials in advance to prepare for the increased demand.

However, this rights offering is unlikely to be viewed positively. As of the first quarter of this year, Hanamicron's cash and cash equivalents amounted to 104.45633 billion KRW, which is almost the same level as the funds to be raised through the rights offering. This suggests that the company could somewhat address debt repayment and raw material procurement with the funds it currently holds.

The participation of the largest shareholder and related parties in the rights offering is similar. The combined shareholding of Hanamicron's largest shareholder and related parties is 27.29%, which amounts to 14,236,106 shares. The shares allocated to them are 1,364,401 shares. They plan to subscribe to only about 40% of the allocated shares, which is 542,642 shares. In particular, Chairman Choi Chang-ho, the largest shareholder holding 8,669,972 shares (16.62%), plans to participate in only about 10% of his allocated shares (839,42 shares), subscribing to 83,094 shares.