Hyundai Glovis (086280 KS/Buy) a Bump Along the Road
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Hyundai Glovis (086280 KS/Buy) A bump along the road Logistics Proposed merger with Hyundai Mobis is scrapped after Mobis decides to end the process Revised restructuring plan to be proposed: Hyundai Mobis split and share swap likely to Issue Comment come first May 23, 2018 Near-term share volatility likely, but long-term growth expectations remain intact Mirae Asset Daewoo Co., Ltd. 1. Proposed merger with Hyundai Mobis is scrapped st [ Transport/Energy] - On May 21 , Hyundai Glovis announced that its proposed merger with Hyundai Mobis has been cancelled. Jay JH Ryu +822-3774-1738 - Hyundai Mobis decided to end the process after taking into account the views of proxy [email protected] advisers and its shareholders. - As such, the May 29th shareholder meetings where the deal was to be put to a vote have also been called off. 2. What to expect next - Hyundai Mobis said that it would come up with a new plan by supplementing and improving on the existing proposal. - We think it is unlikely that Hyundai Motor Group (HMG) will change the basic framework of the original plan, considering its pledge of shareholder-friendly policies, its stated rationale for the spinoff/merger, and the time required. - We expect HMG to untangle its circular shareholdings and gain control of the de facto holding company through 1) the split of Hyundai Mobis, followed by 2) a share swap between major shareholders and Kia Motors (Kia). - 3) We believe the group will then seek to merge Hyundai Mobis’ newly established entity (A/S and modules) with Hyundai Glovis. - In such a scenario, we believe HMG would be able to 1) avoid market questions stemming from major shareholders’ perceived interests and 2) overcome controversy over the merger ratio, as Hyundai Mobis’ new entity would be valued by the market. Latest decision is unfortunate, but expectations on growth remain intact - The latest move is likely to cause near-term volatility in Hyundai Glovis shares. From Hyundai Glovis shareholders’ perspective, there is a chance that the spinoff/merger ratio could be revised in a way that is less advantageous than the original proposal. - That said, we continue to believe the company’s risks regarding related-party transaction regulations will be removed through the share swap. In addition, our expectations on the company’s investments in growth and new businesses remain intact. While the synergistic merger with Hyundai Mobis’ new entity could once again be drawn out depending on shareholder views, we still think a deal could materialize. Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. May 23, 2018 Hyundai Glovis Figure 1. HMG’s 3 stage scenario for restructuring plan Chung Chung Chung Eui-sun Eui-sun Eui-sun Chung Chung Chung Mong-koo Mong-koo Mong-koo Up to 30.2% Hyundai Mobis Hyundai Mobis Hyundai Mobis [012330 KS] [012330 KS] [012330 KS] Hyundai Motor Hyundai Motor Hyundai Motor [005830 KS] [005830 KS] [005830 KS] Kia Motors Kia Motors Kia Motors [000270 KS] [000270 KS] [000270 KS] Merger Hyundai Glovis Hyundai Steel Hyundai Glovis Mobis’ Hyundai Steel Hyundai Glovis Mobis’ Hyundai Steel [086280 KS] [010520 KS] [086280 KS] Module/AS [010520 KS] [086280 KS] Module/AS [010520 KS] Source: Mirae Asset Daewoo Research Table 1. HMG’s restructuring plan scenario and expected improvements Stage Action Improvement - Market would be able to evaluate spinoff ratio - Hyundai Mobis spins off and separately lists - Market pricing of the spun-off entity would 1st stage module and A/S business ensure fairness in subsequent transactions - A share swap prior to the merger between spun-off - Major shareholders exchange their shares in Mobis and Glovis would address controversy over Glovis (30%) and spun-off Mobis (7%) with major shareholders’ interests Kia’s shares in surviving Mobis (16.9%) - That said, major shareholders would bear a - Major shareholders separately raise funds to higher cost burden compared with the original 2nd stage pay for shortfall and taxes plan - Possibility of additional purchases of surviving Mobis shares held by Hyundai Steel and Hyundai Glovis (6.3% combined) - Not directly related to major shareholders’ - Kia secures shares in spun-off Mobis (23.8%) interests and Glovis (30%) - Shareholder views are reflected 3rd stage - HMG gains shareholder support for merger between spun-off Mobis and Glovis and renews push for merger Source: Mirae Asset Daewoo Research Mirae Asset Daewoo Research 2 May 23, 2018 Hyundai Glovis APPENDIX 1 Important Disclosures & Disclaimers 2-Year Rating and Target Price History Company (Code) Date Rating Target Price (W) Hyundai Glovis Hyundai Glovis (086280) 03/29/2018 Buy 210,000 300,000 01/17/2018 Buy 180,000 250,000 04/27/2017 Buy 200,000 200,000 12/02/2016 Buy 220,000 150,000 01/12/2016 Buy 260,000 100,000 50,000 0 May 16 May 17 May 18 Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions. Equity Ratings Distribution & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 75.00% 11.11% 13.89% 0.00% Investment Banking Services 70.73% 19.51% 9.76% 0.00% * Based on recommendations in the last 12-months (as of March 31, 2018) Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of Hyundai Glovis as an underlying asset, and other than this, Mirae Asset Daewoo has no other special interests in the covered companies. Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein. Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. 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