Shares of Daewoo Shipbuilding rise on stake sale plan

Source: Taipei Times
BLOOMBERG

Shares of Daewoo Shipbuilding & Marine Engineering Co, the world's third-largest shipyard, rose to a four-month high in Seoul trading on the government's plan to begin selling a US$3.6 billion controlling stake in the company.

State-owned Korea Development Bank and government-run Korea Asset Management Corp are selecting an arranger to sell their entire 50.4 percent stake in Daewoo Shipbuilding, bank executive director Kim Young-kee said yesterday.

A preferred bidder for the stake could be picked as early as August, he said.

"The official confirmation of the much-expected stake sale is boosting the shares, raising expectations that the company will be able to find a stable owner," said Yoon Pil-joong, an analyst at Samsung Securities Co in Seoul.

"In the long term, the real question is who the buyer will be and whether the new owner will be able to enhance Daewoo's operations," said Yoon, who has a "buy" rating on the stock.

Growing demand for vessels helped Daewoo Shipbuilding deliver a fivefold increase in net income last year to a record 321.2 billion won (US$326 million). Korea Development Bank is selling the shipbuilder as it prepares for its own privatization amid President Lee Myung-bak's drive to boost growth of Asia's fourth-largest economy through deregulation and sale of state assets.

Daewoo Shipbuilding shares rose 11 percent to 36,500 won at the market close in Seoul, the most since Nov. 26. The benchmark Kospi index gained 0.3 percent.

The company has a market value of 7 trillion won based on the stock's closing price yesterday, valuing the government's controlling stake at 3.5 trillion won.

Korea Development's Kim said creditors need further discussions on whether to separate Daewoo Shipbuilding's defense operations.

They were also undecided on whether to accept foreign investors' bids, Kim said.

Daewoo Shipbuilding "is a very attractive company to buy with much potential for growth," said Song Jae-hak, an analyst at Woori Investment & Securities Co.

"It will continue to earn a lot of money at least through 2012," said Song, who has a "buy" rating on the stock.

Seoul-based Daewoo Shipbuilding has received US$1.9 billion in orders so far this year, with order backlogs worth US$38.6 billion that stretch into 2012.