iM Securities said on the 26th that while the share price upside from Hanwha's spin-off is limited, attention should be paid to the potential benefits from the Commercial Act revision. It raised its target price to 138,000 won from 120,000 won. Hanwha's previous closing price was 119,200 won, leaving 15.8% upside potential.
Lee Sang-heon, an analyst at iM Securities, said, "After the spin-off, the stock rose in the short term on expectations for shareholder returns and the potential highlighting of subsidiary value," but noted, "With the dual listing issue unresolved, there are limits to driving medium- to long-term share price gains solely through a spin-off."
Earlier, Hanwha said on the 14th that it would carry out a spin-off to create a surviving company encompassing the defense, shipbuilding and marine, energy, and financial institutional sectors and a new holding company, "Hanwha Machinery & Service Holdings," covering the tech and life institutional sectors.
It explained that expectations for shareholder returns have increased, as it set a goal to cancel 4,458,16 common shares (5.9%) acquired through the exercise of appraisal rights by opposing shareholders and to raise the dividend to 1,000 won.
However, the analyst focused more on the potential narrowing of the holding company discount due to the Commercial Act revision rather than the spin-off itself. The analyst said, "Holding companies have historically had high discounts due to concerns about conflicts of interest among shareholders that may arise from dual listings of subsidiaries and future governance restructuring," adding, "With the Commercial Act revision codifying directors' fiduciary duty to shareholders, such concerns are easing and a reduction in the discount is expected."
The analyst also saw that the Commercial Act revision related to the composition of the audit committee would positively contribute to governance improvement. The analyst added, "If the rule limiting the voting rights of the largest shareholder and related parties to 3% when appointing or dismissing audit committee members is applied, the influence of minority shareholders, overseas institutional investors, and activist funds could expand," and, "This is expected to strengthen the independence of the audit body and lead to overall governance improvements."