Philippine unit drags down Hanjin Heavy

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Philippine unit drags down Hanjin Heavy

Hanjin Heavy Industries and Construction's Subic Shipyard / Korea Times file

Shipbuilder's stock price nearly halves in a week

By Nam Hyun-woo

Midsize shipbuilder Hanjin Heavy Industries and Construction (HHIC) is sinking into a bottomless pit, with its stock price plunging below 1,000 won on negative investor sentiment over a court receivership filing by its overseas unit.

Analysts said Friday there is slim chance of a recovery in the short term, as the shipbuilder seems to have lost its fundamental competitiveness in the sluggish shipbuilding market.

According to the Korea Exchange, HHIC stocks ended at 906 won Friday, down 3.4 percent from a session earlier.

In eight trading sessions so far this year, HHIC ended up losing in seven of them on institutional investors' heavy unloading. Compared to Jan. 2 closing price of 1,590 won, it shed 43 percent in just eight sessions.

HHIC shares went below their face value of 5,000 won for the first time in 2014 and have hovered between 3,000 won and 6,000 won since then. The current downturn began in October, falling below 2,000 won Oct. 22 and below 1,000 won Thursday.

Analysts said the downturn is largely attributable to the receivership filing by HHIC's overseas unit in the Philippines.

On Jan. 8, HHIC-Phil filed the receivership with the Olongapo City Regional Trial Court. The unit, operating Subic Shipyard near Manila, is valued at 1.84 trillion won ― 44 percent of controlling company HHIC's consolidated capital.

Due to a prolonged global shipping downturn, Subic Shipyard logged operating losses of 79.3 billion won in 2016 and 116.7 billion won in 2017, in what appears to be negligence in building high-value added ships such as liquefied natural gas (LNG) vessels.

Its performance in winning new orders was also sluggish, with two vessels in 2016, four in 2017 and six in 2018. Only 10 vessels are remaining in its backlog.

This dealt a severe damage to HHIC, which has logged operating profits in its individual book for three consecutive years.

The receivership is also expected to affect smaller material suppliers in HHIC's home ground of Busan and South Gyeongsang Province as Subic Shipyard sourced material from them. According to HHIC, it has 70 billion won of due payments to 284 companies, most of which are located in the area.

Casting deeper worries over HHIC is that market analysts are pessimistic over the company's recovery.

"HHIC is in need of recognizing because of massive losses stemming from its overseas unit," Shinyoung Securities analyst Um Kyung-a said. "There seems to be a very slim chance for the company to rebound in the short term."

She recommended investors unload their HHIC shares, a rarity as domestic analysts hardly ever issue sell opinions.

"These days, domestic shipbuilders are showing signs of recovery from the shipbuilding downturn, but that's not the case for HHIC," an industry source said. "Most of the recoveries are based on increased demand for LNG ships, but HHIC has no such vessel in its portfolio."


Hanjin Heavy Industries and Construction's Subic Shipyard / Korea Times file

Shipbuilder's stock price nearly halves in a week

By Nam Hyun-woo

Midsize shipbuilder Hanjin Heavy Industries and Construction (HHIC) is sinking into a bottomless pit, with its stock price plunging below 1,000 won on negative investor sentiment over a court receivership filing by its overseas unit.

Analysts said Friday there is slim chance of a recovery in the short term, as the shipbuilder seems to have lost its fundamental competitiveness in the sluggish shipbuilding market.

According to the Korea Exchange, HHIC stocks ended at 906 won Friday, down 3.4 percent from a session earlier.

In eight trading sessions so far this year, HHIC ended up losing in seven of them on institutional investors' heavy unloading. Compared to Jan. 2 closing price of 1,590 won, it shed 43 percent in just eight sessions.

HHIC shares went below their face value of 5,000 won for the first time in 2014 and have hovered between 3,000 won and 6,000 won since then. The current downturn began in October, falling below 2,000 won Oct. 22 and below 1,000 won Thursday.

Analysts said the downturn is largely attributable to the receivership filing by HHIC's overseas unit in the Philippines.

On Jan. 8, HHIC-Phil filed the receivership with the Olongapo City Regional Trial Court. The unit, operating Subic Shipyard near Manila, is valued at 1.84 trillion won ― 44 percent of controlling company HHIC's consolidated capital.

Due to a prolonged global shipping downturn, Subic Shipyard logged operating losses of 79.3 billion won in 2016 and 116.7 billion won in 2017, in what appears to be negligence in building high-value added ships such as liquefied natural gas (LNG) vessels.

Its performance in winning new orders was also sluggish, with two vessels in 2016, four in 2017 and six in 2018. Only 10 vessels are remaining in its backlog.

This dealt a severe damage to HHIC, which has logged operating profits in its individual book for three consecutive years.

The receivership is also expected to affect smaller material suppliers in HHIC's home ground of Busan and South Gyeongsang Province as Subic Shipyard sourced material from them. According to HHIC, it has 70 billion won of due payments to 284 companies, most of which are located in the area.

Casting deeper worries over HHIC is that market analysts are pessimistic over the company's recovery.

"HHIC is in need of recognizing because of massive losses stemming from its overseas unit," Shinyoung Securities analyst Um Kyung-a said. "There seems to be a very slim chance for the company to rebound in the short term."

She recommended investors unload their HHIC shares, a rarity as domestic analysts hardly ever issue sell opinions.

"These days, domestic shipbuilders are showing signs of recovery from the shipbuilding downturn, but that's not the case for HHIC," an industry source said. "Most of the recoveries are based on increased demand for LNG ships, but HHIC has no such vessel in its portfolio."


Nam Hyun-woo namhw@koreatimes.co.kr


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