Hyundai Heavy shares hit 52-week high on hope for recovery, spin-off

Published : Mar 3, 2017 - 10:29 Updated : Mar 3, 2017 - 16:02

Hyundai Heavy Industries Co., a major shipyard here, traded at a 52-week high on Friday on simmering expectations that the shipbuilding sector is on a recovery track and its plan to spin off non-shipbuilding businesses may boost its competitiveness.

Hyundai Heavy closed at 167,500 won ($146) on the Seoul bourse, up 1.21 percent from the previous session's close, while the broader index, the KOSPI, dropped 1.14 percent.

For the past month, the combined market capitalization of Hyundai Heavy and its affiliate Hyundai Mipo Dockyard Co. increased some 25 percent, the largest gain among the country's top 10 conglomerates.

(Yonhap)

Analysts said a recovery in the shipbuilding segment is fueling Hyundai Heavy stocks as a rise in demand for liquefied natural gas from emerging nations is stoking demand for LNG carriers and floating storage and regasification units.

So far this year, Hyundai Heavy has secured a deal to build a total of four ships, including two very large crude carriers and an FSRU.

"Hyundai Heavy has been clinching deals since late last year, and the shipbuilder is set to win more deals down the road," said Rhyu Jae-hun, an analyst at NH Investment & Securities.

Also, the shipbuilder's plan to hive off its business units is expected to raise the shipbuilder's overall competitiveness.

Late last month, shareholders of Hyundai Heavy approved the company's plan to spin off its non-core businesses.

Under the plan, the shipyard will be split into four independent entities: shipbuilding, electronics, construction equipment and robotics, with the four to be formally launched in April. The trade of Hyundai Heavy shares will be suspended from March 30 through May 9.

The shakeup comes as part of a broader effort by the troubled shipyard to salvage itself from high indebtedness. The spinoff is expected to reduce the shipyard's debt ratio to 95 percent from 106 percent at the end of last year.

Analysts said the spin-off may help improve its governance, and each business will strengthen their own competitiveness as well.

"Hyundai Heavy's spin-off will also help improve the financial status of the group as a whole," said Choi Kwang-shik, an analyst at Hi Investment & Securities.

Hyundai Heavy's stock price may further rise through this month before its trading is halted, but afterwards its stock price may depend on its performance.

Hyundai Heavy swung to the black last year from a year earlier, thanks in part to reduced costs and improvement in its non-shipbuilding business.

Net income came to 682 billion won last year on a consolidation basis, a turnaround from a loss of 1.36 trillion won a year earlier.

Sales dropped 15 percent on-year to reach 39.32 trillion won, while it logged an operating profit of 1.64 trillion won, a rebound from an operating loss of 1.54 trillion won tallied in the same period the year before, it said earlier. (Yonhap)