Mega IPOs May Help Shore up Sagging Stock Market

SEOUL, Nov. 3 (Korea Bizwire) — Samsung BioLogics, a biopharmaceutical unit of Samsung Group, and Doosan Bobcat Co., an affiliate of power equipment conglomerate Doosan Group, are set to make their market debuts this month, which some analysts say may help the local stock market recover from a recent market turmoil.

Last week, Samsung BioLogics, which makes copies of drugs, priced its initial public offering (IPO) at the top end of its price band of 136,000 won, allowing it to raise up to 2.25 trillion won (US$1.97 billion) through the IPO slated for Nov. 10.

The IPO will mark the largest since Samsung Life Insurance Co.’s 4.89 trillion won in 2010.

Investors have shown keen interest in Samsung BioLogics as the country’s leading conglomerate has been realigning its business portfolio to find new revenue sources. In particular, Samsung’s heir apparent Lee Jae-yong has pointed out that the biosimilar business is one of the group’s key businesses in the future.

According to Samsung BioLogics, demand from overseas and domestic institutional investors for the planned IPO were greater than expected. During book building sessions held last week, institutional investors made bids totaling 380 trillion won.’

“It is natural that a successful IPO, when its size is big, will have a positive impact on investor sentiment,” said Lee Suk-hoon, a researcher at the Korean Capital Market Institute.

Analysts said investors bet that Samsung Group will continue to invest in the bio arm, which will help prevent a sharp drop after the market debut.  

Samsung BioLogics is 52.1 percent owned by Samsung Group’s de facto holding company Samsung C&T Corp. and 47.8 percent controlled by Samsung Electronics Co., a global tech giant. 

Samsung BioLogics owns 91.2 percent of Samsung Bioepis Co., which is rumored to make a market debut in the U.S. next year.

“The bio pharmaceutical market has been growing steadily, and Samsung will benefit given its capacity,” said Roh Kyong-cheol, an analyst at SK Securities.

Samsung BioLogics is investing $730 million in its third plant with a bioreactor capacity of 180,000 liters. Once the third plant is operational in 2018, Samsung BioLogics is expected to have the world’s largest capacity for a biologics contract manufacturing organization (CMO), with a total production capacity of 362,000 liters.

The country’s stock market has been suffering a protracted slump in the past week, weighed down by economic and political uncertainties at home and abroad. The scandal involving a confidante of President Park Geun-hye has caused a stir in the country, which has sent ripples through the corporate sector.

Also, uncertainties over the U.S. presidential election increased market volatility.

“If the market turns higher down the road and market uncertainties are reduced, newly listed stocks will draw attention from investors,” said Bae Sun-young, an analyst at Hyundai Securities.’

The IPO by Doosan Bobcat Inc., a unit of power and construction equipment conglomerate Doosan, is also one of this year’s big deals. The construction equipment maker’s market debut is slated on Nov. 18. Its size may be some 1 trillion won.

In the face of lukewarm market response, Doosan Bobcat lowered the price band to between 29,000 won and 33,000 won for the IPO last month, compared with the previously offered range of between 40,100 won and 50,000 won.

But analysts say that its IPO retrial may be successful given its reduced size.

Doosan Infracore Co. and Doosan Engine Co. own a majority 78.4 percent stake in Doosan Bobcat, which operates 31 subsidiaries in 20 countries. Doosan Bobcat is a leading player in the small construction machinery sector in the United States.

“Doosan Bobcat has maintained its competitiveness in the U.S., and is seeking to expand its presence in Europe,” said Rhyu Jae-hoon, an analyst at NH Investment & Securities. “The company is backed by strong earnings.”

Doosan Bobcat’s major products include a compact track loader and a mini excavator, with market shares topping the North American market.

Doosan Bobcat has seen sharp growth in the past few years.

Last year, Doosan Bobcat posted an operating income of 386 billion won on sales of 4.04 trillion won.

In the first half of the year, Doosan Bobcat logged an operating income of 235 billion won on sales of 2.15 trillion won.

In 2007, Doosan Infracore acquired Bobcat and other construction equipment units from North Carolina-based Ingersoll Rand PLC for $4.9 billion.

(Yonhap)