Samsung Card Co. Ltd. on Thursday raised a higher-than-expected 576 billion won ($619.7 million), pricing its share sale above an indicated range on heavy investor demand and waking up a sleepy Seoul IPO market.
The listing by South Korea's No. 2 credit card company has been in the spotlight as the first domestic initial public offering with shares set aside for foreigners. The deal is a test case for new South Korean listing rules aimed at bringing the market for local listings out of a 10-year slumber.
The offering, the biggest on South Korea's bourse in the first half of 2007, may herald a revival in the Seoul IPO market amid a record-setting bull run on the benchmark stock index, which is up 22 percent since the start of the year.
It comes ahead of high-profile offerings expected later this year. Kyobo Life Insurance and Samsung Life Insurance are expected to raise as much as a combined $2 billion, while bourse operator Korea Exchange is eyeing an IPO to raise $700 million.
Samsung Card was lucky that it offered shares when the market was hot and investor sentiment was good, said Kim Hyung-chan, a fund manager at KTB Asset Management.
Considering its growth potential and compared with LG Card, it also had no reasons to discount its share price.
Samsung Card's IPO comes at a time when domestic banks and finance firms have been ramping up the card business again after a credit card bubble burst in 2003-2004.
The company, in which Samsung Electronics Co. Ltd. and other Samsung Group units hold over 80 percent, priced its IPO shares at 48,000 won each, above their indicated range of 40,000-45,000, ahead of a June 27 listing.
It sold 12 million shares, or 11.4 percent of its outstanding shares, and will use proceeds to repay debt and for operations.
The IPO is the largest in South Korea since Macquarie Korea Investment Fund raised $3.8 billion in a London-Seoul offering in March 2006.
Based on the IPO price, Samsung Card will have a market capitalisation of 5.06 trillion won, slightly below that of bigger rival LG Card's 5.9 trillion won. LG Card raised 464 billion won in a 2002 IPO.
Samsung Card's IPO attracted $10 billion in orders from foreign investors, making the foreign portion 56 times subscribed. Domestic institutions applied for more than 50 million shares of Samsung Card, or 14 times those available, a Korea Investment official said before the pricing announcement.
South Korean firms raised a combined $7.4 billion in IPOs between June 1, 2002 and the end of May 2007, compared with nearly $102 billion raised in Hong Kong over the same period, according to Dealogic.
REBOUND IN CARD BUSINESS
Samsung Card's IPO price represents 10.5 times its forecast 2007 earnings, compared with LG Card's 6.2 times estimated net profit. LG Card's shares are stuck near the 46,392 won level at which Shinhan Financial Group is buying the firm.
Shinhan's $7.2 billion acquisition of LG Card last year is also expected to deal a severe blow to card-only rivals with aggressive marketing and low-cost funding.
But some are optimistic about the credit card industry.
The outlook for the credit card sector is strong given the recovery of domestic demand. Stronger consumption will help profits in the card industry, said Kim Hyun-tae, a fund manager at Landmark Investment Management.
Shares should shoot up on the first day.
Samsung has about 6.9 million customers, or 29 percent of South Korea's economically active population.
Samsung Electronics' stake in the card issuer will be cut to 41.2 percent after the IPO from 46.9 percent. Unlisted Samsung Life Insurance will own another 30.8 percent versus the previous 35.1 percent.
Korea Investment & Securities lead managed the deal.
Merrill Lynch (MER.N: Quote, Profile, Research), Woori Investment & Securities, Samsung Securities and Mirae Asset Securities also handled the IPO.
Samsung Card has an outstanding convertible bond issue of $800 million, which it is expected to convert and could potentially result in dilution. The conversion price was set at 43,040 won apiece and the bond is exercisable by May, 2008.
Samsung Card shares will trade under the Reuters Instrument Code.
(Additional reporting by Rafael Nam and Kim Soyoung)