Hana Securities on the 31st said it views Samsung Biologics(207940), which recently decided on a rights offering worth about 3 trillion won, as the best time to invest cheaply in the company's growth from a long-term perspective. It maintained a "Buy" rating and a target price of 2.05 million won. The previous session's closing price was 1.486 million won.
On the 28th, Samsung Biologics said it will issue 2.27 million shares (capital increase ratio 4.9%) through a shareholder allotment followed by a public offering of forfeited shares. The planned issue price is 1.322 million won, and the ratio of new shares allotted per existing share is 0.039 share.
The total planned amount to be raised is about 3 trillion won, with about 2.7 trillion won to be used for acquiring the Swiss PolyPeptide Group and about 300 billion won for expanding Plant 6.
Kim Seon-a, an analyst at Hana Securities, said, "The market seems to question raising the entire 2.71 trillion won, the planned amount for the PolyPeptide acquisition, through a rights offering," adding, "For the answer, it is necessary to refer to the securities registration statement disclosed after the market closed that day."
According to Samsung Biologics' future investment expenditure plan, the company plans to invest about 15.4 trillion won through 2034, including the PolyPeptide acquisition and the expansion of Plant 6. Most of the plans will proceed simultaneously, and about 64% of the planned expenses will be投入 by 2029.
Kim said, "As of the end of the half, Samsung Biologics holds about 2.1 trillion won in cash and cash equivalents and generates more than about 2 trillion won in operating profit annually, but with the recent rise in benchmark rates, the interest rate on AA-rated corporate bonds is also high at 4.41%, so interest expenses on 3 trillion won would be at least 132.3 billion won per year, which is considerable," adding, "If the entire 3 trillion won is borrowed, the debt ratio would temporarily rise from the current 51% to as high as 87%, significantly reducing future borrowing capacity."
Samsung Biologics also appears to need to factor in additional expenses to replace facilities or improve efficiency at the Rockville plant and the PolyPeptide plants acquired this year.
Kim explained, "Therefore, rather than straining to secure loans or corporate bonds all at once, it is reasonable to leave room to use them strategically when needed, and if a rights offering will be needed at least once in the future anyway, the company's view that now, a period of high interest rates, is the right time is, for now, valid."
According to the prospectus for this rights offering, 100 billion won in investment execution is planned this year for Plant 6. On this, Kim said, "It seems likely we will hear groundbreaking news by year-end, and as with Plants 4 and 5, we can expect a series of large-scale order contracts to follow," adding, "Also, major shareholders Samsung C&T and Samsung Electronics together contributed about 2 trillion won in the 2022 rights offering, so they are expected to contribute the full allotment of new shares this time as well."
She added, "This funding goes beyond expanding domestic capital expenditures (CAPEX) to include securing global production bases and diversifying modalities, so it is judged to be the optimal time to invest cheaply in the company's growth from a long-term perspective."