In a deal that was two times subscribed, Daewoo Shipbuilding priced its recent issue tightly at a 4.04% discount and raised $240.7 million (with greenshoe).
The deal, which received 120 orders, was split geographically between Asia (56%), the US (30%) and Europe (14%).
The deal was well received in large part because the company has been included in the MSCI index for the first time and ranks as one of the few strong outperformers on the Kospi so far this year. Indeed, the stock is up 40% this year versus a rise of 1.5% for the Kospi.
Much of this is to do with industry trends. In 1999 the Korean shipbuilding sector overtook Japan as the world's largest and over the past couple of years, Daewoo Shipbuilding has become the analyst's favourite overtaking listed comparables Hyundai Heavy and Samsung Heavy.
The company is perceived to be free from cross shareholding issues and has been able to maintain a clean balance sheet and strong growth trajectory. The world's second largest shipbuilder, Daewoo Shipbuilding is also said to be benefiting from an EU ban on single-hull tankers. Three of five recent orders worth $350 million came from Europe and the company has now secured 58% of its order target for 2003.
It is currently trading on a p/e multiple of about 6.8 times 2003 earnings and 5 times EV/EBITDA, down from a p/e of 10.4 times this time last year, but up from 6 times towards the tail end of last year. Net debt to equity stands at 31%.
The new offering has led to controlling shareholders Kamco and KDB selling down from 69.7% to 54.7%.
Investors seemed to have been convinced by the story. Much of this seems to have rested with the quality of the management - which canceled 3% of the stock last year via a share buyback. On a broader front, buying the stock allows fund managers to get a Korean weighting while taking exposure to a stock with a global exposure.
The lead managers were Goldman Sachs and JPMorgan, and economics were split on a pro-rata basis based on which of the shareholders the banks were representing (Kamco and KDB respectively).
