Investors are all aboard on Hyundai Rotem IPO

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Investors are all aboard on Hyundai Rotem IPO

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A visitor walks past a Hyundai Rotem booth at the Aerospace and Defense Exhibition held at Kintex, Gyeonggi, on Tuesday. [BLOOMBERG]

Hyundai Rotem, the train manufacturer of Hyundai Motor Group, exceeded expectations in the biggest initial public offering (IPO) in Korea in three years.

The train manufacturer saw its shares soar on its first trading on the Seoul main bourse yesterday, closing at 38,750 won ($36.55) after hitting the daily limit of 15 percent. That was nearly 69 percent higher than the 23,000 won that Hyundai Rotem priced its shares in a regulator filing earlier this month. The company hoped it would raise 622.4 billion won.

Hyundai Rotem IPO is the largest IPO since Samsung Life Insurance’s 4.9 trillion won deal in 2010.

The market opened up by trading shares of the train maker 47 percent higher than the initial offered price of 33,700 won.

The share value of the company rose largely thanks to retail investors.

As a result, market capitalization of Hyundai Rotem at the end of the day amounted to 3.3 trillion won, which ranks 70th on the benchmark Kospi. It is roughly the same as Hanwha Chemical.

Investors have kept keen interest on Hyundai Rotem’s IPO not only as it was the largest since Samsung Life Insurance, but because many companies have refrained from being listed on the stock market due to the recession.

In the first half of the year, 13 companies were listed on the local stock market. Although this is a 30 percent increase from the nine companies listed during the first half of 2012, there were 35 listed in the first half of 2011.

Many investors expected Hyundai Rotem’s IPO would further fuel the lukewarm IPO market.

Founded in 1977, Hyundai Rotem dominates the train market in Korea. While 48 percent of its earnings come from its train business, 15 percent is from defense business and 37 percent from its plant construction business. Hyundai Motor is its largest stakeholder at 43.4 percent.

In the first half of the year, Hyundai Rotem reported 1.5 trillion won in revenue with 93 billion won in operating profit. This is a 7.4 percent and 32.9 percent increase compared to the same period last year. In 2012, the company reported an all-time high revenue of 3.1 trillion won and operating profit of 175 billion won.

The company projected its revenue this year will reach nearly 3.2 trillion won with operating profit at 180 billion won. For next year, it estimates revenue at 4 trillion won with 200 billion won operating profit.


BY LEE HO-JEONG [ojlee82@joongang.co.kr]

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