Korea Investment & Securities said on the 11th that Samsung Heavy Industries is its top pick in shipbuilding based on upside potential. It maintained a "buy" rating and raised the target price to 32,000 won, up 33.3% from before. In the previous session, Samsung Heavy Industries ended trading at 21,550 won.
According to Korea Investment & Securities, the target price was calculated by dividing the fair corporate value of 27.9 trillion won by the number of shares outstanding (854 million shares). The fair corporate value was derived by adding 19 trillion won for the core business value and 8.9 trillion won for MASGA (Make American Shipbuilding Great Again) value, then subtracting net debt.
Kang Kyung-tae, an analyst at Korea Investment & Securities, said, "From the standpoint of Samsung Heavy Industries, which had no links to the U.S. market unlike rivals with opportunities to build new warships, MASGA is an important catalyst that can narrow the valuation gap with competitors," adding, "It is an opportunity to buy before a full-fledged re-rating of the only shipbuilder whose current valuation can be explained by its core business value alone."
Kang said, "For the MASGA value of 15.1 trillion won we presented to materialize in earnest, events such as announcing a direct investment plan, rather than a memorandum of understanding (MOU), are needed," adding, "To execute the investment plan, funding is required, and in addition to borrowing from private financial institutions and government participation, the possibility of a capital increase cannot be ruled out."
He added, "Since the purpose of the funds is a capital increase for entry into the U.S. market, it would be an event acceptable to existing shareholders," and "In this case, after a temporary shock, the MASGA value will be reflected in the share price very quickly."