Kiwoom Securities on the 29th projected that Hanwha Corporation's combined market capitalization will increase following its spin-off scheduled for the 1st of next month, maintaining a 'Buy' rating and 169,000 won target price. The securities firm stated that a pre-split purchase strategy remains valid, with Hanwha's previous closing price at 86,800 won. The spin-off will separate Hanwha into two entities: the surviving holding company controlling Hanwha Aerospace, Hanwha Solutions, and Hanwha Life, and a newly established holding company overseeing Hanwha Vision, Hanwha Galleria, and Hanwha Hotels & Resorts. Trading will be suspended from the 30th until the 24th of next month, one day before the revised listing date. Analyst An Young-jun from Kiwoom Securities attributed the positive outlook to the surviving entity's higher proportion of transferred NAV relative to its split ratio.
Hanwha Splits Into Two Holding Companies With 0.756:0.244 Ratio
Hanwha will split on the 1st of next month with a division ratio of 0.756 for the surviving entity and 0.244 for the new entity. Considering the face value change of the new corporation's shares, the allocation ratio for new shares of the split corporation is projected to be 1.22 shares per 1 share held. The surviving holding company will control Hanwha Aerospace, Hanwha Solutions, and Hanwha Life, while the newly established holding company will oversee Hanwha Vision, Hanwha Galleria, and Hanwha Hotels & Resorts.
Kiwoom Securities Projects Market Cap Increase Based on NAV Analysis
An Young-jun, researcher at Kiwoom Securities, stated that Hanwha's recent stock price has been influenced by movements in Hanwha Aerospace, which accounts for approximately 90% of its net asset value (NAV), with the NAV discount rate consistently maintained in the mid-to-high 60% range. The analyst explained that the surviving entity, which retains control over Hanwha Aerospace, is expected to apply a discount rate similar to the existing rate to its NAV including Hanwha Aerospace.
Surviving Entity Expected to Trade Above Theoretical Price
The surviving entity is likely to see its post-split stock price rise above the theoretically formed price because the proportion of transferred NAV (over 90%) is higher than the split ratio (75.6%), according to Kiwoom Securities. An Young-jun added that an increase in NAV per share due to the reduction in the number of shares, and a stock price rise based on this, can also be anticipated.
New Entity May Reflect Higher Valuation of Unlisted Assets
Kiwoom Securities assessed that the new entity's NAV has room to increase compared to the existing level because the value of unlisted companies evaluated at book value, such as Hanwha Hotels & Resorts, could be highlighted. Hanwha's 49.8% stake in Hanwha Hotels & Resorts has a book value of only 249.1 billion won, but the company's capital as of the end of last year reached 5.7 trillion won. Additionally, last year Hanwha acquired a 58.7% stake in Our Home for 869.5 billion won. An Young-jun stated that this value has been diluted due to low weight until now, but after the split, it is highly likely to be reflected more precisely, and the combined market capitalization of the two entities after the split is expected to increase compared to the existing level due to price discovery in this area.
FAQ
What is Hanwha Corporation's spin-off ratio scheduled for next month?
Hanwha will split with a division ratio of 0.756 for the surviving entity and 0.244 for the new entity on the 1st of next month. Considering face value changes, shareholders will receive 1.22 shares per 1 share held.
Why does Kiwoom Securities project Hanwha's combined market cap will increase after the split?
Kiwoom Securities analyst An Young-jun stated the surviving entity will receive over 90% of NAV while representing only 75.6% of the split ratio, and the new entity's unlisted assets like Hanwha Hotels & Resorts may be revalued above current book values of 249.1 billion won versus actual capital of 5.7 trillion won.
