Drivers include massive amounts of debt maturing in 2012 and corporate efforts to reserve liquidity for expansion and balance sheet improvement. The listing of subsidiaries of conglomerates Samsung, LG, SK, and Lotte Group will be particularly targeted by IPO arrangers, the bankers said.
About KRW 34tn (USD 32bn) worth of bonds are set to mature in the first quarter and another KRW 70tn worth sold by corporate and financial service providers are due later in the year, according to data from Korea Securities Depository.
IPOs including Hyundai Oilbank, Mirae Asset Life Insurance and Siltron are likely to raise a total amount similar to the KRW 4tn (USD 3.8bn) raised in 2011 from IPOs in Korea or even more, people interviewed said.
Timing the market and a divergence in pricing, however, are potential risks for IPO candidates in an unpredictable economic climate.
“We are seeing much more sentiment-driven market movement than movement by fundamentals, which is the primary reason for a very choppy and volatile market,” said David Lee, Head of Global Equity Capital Markets at Daewoo Securities (Hong Kong).
Siltron, a South Korean silicon wafer maker, put off an at-least-KRW 500bn (USD 440m) offering until next year due to the global market turmoil. Hyundai Oilbank, the oil refinery unit of Hyundai Heavy Industries [0095440: KS], expects to file a preliminary application in March for a USD 2bn IPO by June. South Korea’s Mirae Asset Life Insurance plans to list in the second half and polyester maker Huvis, a joint venture of SK and Samyang Corp, plans to raise at least KRW 200bn by February.
“The details of Siltron’s IPO are still under discussion but it is likely to float around the same time as Hyundai Oilbank,” said a source familiar with the listing process.
Other larger deals expected next year include CJ Hellovision, a South Korean multiple cable channel operator, which delayed an at-least-USD 1bn IPO to 2012 because of ongoing disputes with regional broadcasters.
South Korea’s booming smart-phone sector will also lure component and material makers to launch small- and medium-sized IPOs, said an IPO banker at Hyundai Securities.
Korea’s strong liquidity and mature and active retail investor base are likely to provide support in completing some of the planned offerings despite choppy markets, Daewoo’s Lee said.
An ECM banker at Woori Investment & Securities felt that the subdued mood this month looked worrying for new IPOs next year currently moving ahead with the listing process.
“Other than Hyundai Logiem, I don’t see many other opportunities for proposals in coming weeks, especially big, fresh IPO candidates,” he noted. Hyundai Logiem recently requested several investment banks to submit proposals for a 2012 listing, as earlier reported.
Work on a possible IPO from state-run Korea Development Bank is also expected to gain some traction after April’s presidential election. KDB is required to sell a stake by May 2014, and an IPO is considered one route to take before conducting a majority stake sale later. The bank’s lack of a retail banking business is seen as a major obstacle to a listing because it could fail to maximize the valuation, a source following the situation said. In his view, the bank should add a retail banking business before the stake sale.
KDB was reportedly in talks to buy HSBC’s retail banking units. A KDB spokesperson declined to comment and said the bank had not finalized any plans
HK Stock Exchange Listing
Korean companies’ growing presence in China and Southeast Asia could facilitate interest in overseas listings, such as Hong Kong, the largest IPO market in the world for two years running, but it is unlikely to be a major source of funding.
South Korean market liquidity and the complex tax structure for the holding company’s listing in Hong Kong will leave only those Korean companies with substantial Chinese divisions as the most likely IPO candidates.
Korean companies in the consumer and IT sectors are the most likely of those companies to be able to attract Hong Kong investors by adding an element of diversity to the investments available, according to Datuk Paul Chong, Managing Director and Head of Investment Banking at Samsung Securities Asia.
Six Korean companies in the gaming, financial services and consumer sectors are considering listing in Hong Kong next year, he added.
Another investment banker who declined to be named said that several Korean companies including POSCO have been studying listing subsidiaries in foreign stock markets to enhance overseas operations but no major progress has been made.
Listing amounts remain a challenge because small and medium deals have failed to garner much of the spotlight in Hong Kong, the banker said.
“Bigger IPOs tend do better as they serve investors more in terms of security, volume and liquidity,“ Chong said, agreeing with the banker. For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
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