Investors rushed to dump Hanwha Ocean Co. shares early Tuesday after news that its second-largest shareholder, Korea Development Bank, will unload its stake in South Korea’s No. 3 shipbuilder in multiple block trades.
Hanwha Ocean lost about 12% in the morning trade, wiping nearly all of its gains last Friday.
On Monday, sources in the investment banking industry said Korea’s state-run KDB has embarked on a process to tap institutional investors’ demand for its stake in Hanwha Ocean.
KDB currently owns the second-largest 19.50% stake, or 59,738,211 shares, in the Korean shipbuilder, according to Seoul-based financial data provider FnGuide Inc.
It plans to unload its holdings in multiple block sales, of which up to 100 billion won ($7 million) worth of shares are expected to be put up for grabs first in a block trade, depending on the bookbuilding result, said an unnamed KDB official, adding that the state policy bank aims to sell off all of its stake in Hanwha Ocean ultimately.
TO IMPROVE FINANCIAL SOUNDNESS
KDB assumed shares of Hanwha Ocean, previously called Daewoo Shipbuilding & Marine Engineering (DSME), in 2000 as part of the state’s bailout program for the debt-ridden shipbuilder.
In 2022, Hanwha Group agreed with KDB, then DSME’s main creditor, to take over a 49.3% stake in DSME by purchasing all new shares issued by the troubled shipbuilder.
Immediately after the deal was finalized, KDB’s holdings in DSME dropped to 28.2% from 55.7%.
Korea’s state bank has decided to dispose of its stake in the shipbuilder to shore up its financial health, according to sources.
Its BIS capital adequacy ratio, a barometer of a bank’s financial stability, stood at 13.9% as of end-2024, hovering near the local financial authority’s recommended 13% and above.
The higher the risk assets, such as stocks, the lower the bank’s BIS ratio, which is a sign of deterioration in its financial stability.
TIME TO BUY THE DIP?
Due to KDB’s potential block sales of its stake in Hanwha Ocean, market analysts expect the shipbuilder stock would undergo a correction, but not for the long term.
Hanwha Ocean’s profit is expected to improve in the latter part of this year, partly driven by a fall in low-priced ship order backlog, said Lee Ji-ni, an analyst at Daishin Securities Co.
“As the company plans to add a 6,500-ton floating crane and expand a floating deck, its (annual) production capacity for offshore plants will rise to four units from two units and for vessels to 40-44 units from 36-40 units thanks to a significantly improved efficiency in vessel construction,” said Lee.
On Monday, Hanwha Ocean announced in regulatory filings its plans to invest 332.8 billion won to expand its floating deck to ramp up production capacity and 268.0 billion won to install a 6,500-ton floating crane to improve efficiency.
The facility investment plans were announced after it reported solid earnings for the first quarter of this year.
It reported 258.6 billion won in operating profit for the January-March period, nearly quintupled from the same period of last year and beating the market consensus by more than 100 billion won.
Its sales jumped 37.6% to 3.14 trillion won over the same period.
Hanwha Ocean’s robust result was largely owed to an increase in orders of high-value-added vessels, including liquefied natural gas (LNG) ships.
In a separate filing on Monday, the shipbuilder announced that it won 371 billion won worth of orders from a shipper in Oceania last Friday to build two units of very large crude carriers (VLCCs), with a plan to complete the construction by July 2025.
By Yeon-Su Shin
sys@hankyung.com
Sookyung Seo edited this article.
