20171206-三星证券-Confirms_holding_company_transformation_6页_344kb

Summary of Hyundai Development Co (012630) Company Update - 2017.12.6

Core Content

Hyundai Development Co (HDC) has confirmed its plan to transform into a holding company structure, a move that is expected to enhance shareholder value by improving management efficiency, transparency, and decision-making processes. This transformation is set to be carried out through a spin-off of its operating entity, with the general shareholder meeting scheduled for Mar 23, 2018, and the relisting of the holding company expected by Jun 12, 2018.

Main Points

• Structure Transformation: HDC will transition from its current operating structure to a holding company, managing most of its subsidiaries and investing in new businesses. The operating entity will focus on the construction sector.
• Split Ratio: The split ratio is set at 0.42:0.58, based on HDC's financial statements and asset holdings as of Sep 30.
• Shareholder Approval: The transformation requires approval from at least 1/3 of existing shareholders and 2/3 of those with voting rights.
• Trading Suspension: Trading will be suspended from Apr 27 to Jun 11, 2018, and the holding company will be relisted on Jun 12, 2018.
• Shareholder Impact: Shareholders who oppose the transformation will not be granted appraisal rights. Ownership structure will change based on the split and share price movements.
• Valuation and Financials: The current price of HDC is KRW42,600, with a target price of KRW51,000, indicating a potential 19.7% upside. The company's financial performance is expected to improve, with a rise in EPS and net profit over the next few years.

Key Financial Information

Financial Changes Post-Spinoff

Ownership Scenario

Financial Ratios

Valuation and Performance

• Target Price: KRW51,000 (19.7% upside from current price of KRW42,600).
• One-Year Performance: HDC has shown a 4.7% gain in the first month, -15.0% over six months, and 1.9% over twelve months.
• Comparisons: HDC's performance has lagged behind the Kospi index, which has shown 6.7%, -19.8%, and -20.3% over the same periods.

Strategic Implications

• The transformation is expected to increase the operating company's share price through improved capital efficiency and more shareholder-friendly policies, including potential dividend increases.
• The holding company will be valued using a sum-of-the-parts approach, with an estimated fair value of KRW51,000 per share.
• The restructuring may lead to a more focused and efficient operation, with the operating entity concentrating on construction and the holding company managing other subsidiaries.

Schedule

Analysts and Contact

• Sokmo Yun: Analyst, Samsung Securities
  • Email: sokmo.yun@samsung.com
  • Phone: 822 2020 7843
• Jooki Han: Research Associate, Samsung Securities
  • Email: jooki88.han@samsung.com
  • Phone: 822 2020 7789

Investment Rating

• BUY (82.2%): Expected to increase in value by 10% or more within 12 months and is highly attractive within the sector.
• HOLD (17.8%): Expected to increase/decrease in value by less than 10% within 12 months.
• SELL (0%): Expected to decrease in value by 10% or more within 12 months.

Disclaimer

• This report is for informational purposes only and does not constitute an offer or solicitation to buy or sell any securities.
• It does not provide individually tailored investment advice.
• Samsung Securities disclaims all responsibility or liability for any loss or damage arising from the use of this report.
• The information provided is "AS IS" and may not be accurate or complete.