UPDATE 1-Korea Exchange picks underwriters for IPO
Thu Nov 16, 2006 9:13pm ET
(Adds details, analyst quotes, change sourcing to KRX)
By Kim Soyoung and Rafael Nam
SEOUL, Nov 17 (Reuters) - Bourse operator Korea Exchange said on Friday it had chosen Daewoo Securities Co. (006800.KS: Quote, Profile, Research) and Korea Investment & Securities Co. to underwrite its April 2007 domestic initial public offering.
Sources familiar with the plans told Reuters on Thursday that Asia's fourth-largest exchange wanted to list half of its 40 million shares and raise 1.2 trillion won to 1.3 trillion won ($1.39 billion).
Korea Investment and Securities is part of Korea Investment Holdings (071050.KS: Quote, Profile, Research).
The Korea Exchange (KRX), which operates South Korea's benchmark KOSPI <.KS11>, the junior Kosdaq <.KQ11> and futures markets, is 86 percent owned by domestic brokerages, with the rest owned by other smaller institutions.
Although the number of outstanding shares was doubled to 40 million through a bonus issue, there has been no new share issuance, so that the entirety of the profits would go to current stakeholders.
Any single shareholder is barred from owning more than a 5 percent stake in the exchange according to South Korean regulations desgined to maintain the bourse's public functions.
The KRX is expected to start roadshows in late March, with pricing and listing scheduled for April, one of the sources said.
The KRX is pursuing a listing just as regional markets are hitting all-time highs, helping drive profits at listed rivals such as Hong Kong Exchanges and Clearing Ltd (0388.HK: Quote, Profile, Research), which is on track to post record profits in 2006.
The listing would also mark a critical step in the KRX's intention to expand in the region, which has so far involved signing cooperation agreements with global bourses, including one signed with the Nasdaq Stock Market (NDAQ.O: Quote, Profile, Research) in October.
"There is the possibility foreign bourses such as the Tokyo Stock Exchange would seek to buy some stakes in the KRX IPO, as part of efforts to deepen cooperation," said David Kim, analyst at Kyobo Securities.
"If that happens, it will boost the KRX's international competitiveness and encourage foreign firms to list in Seoul."
The KRX signed an arlliance with the unlisted Tokyo Stock Exchange [TSE.UL] in July, leaving the door open for a future merger or cross-to better compete as bourses around the world consolidate.
The Tokyo bourse's sharholdings are seeking a listing in 2009.
KOREA DISCOUNT
The listing could value the KRX at up to 2.6 trillion won, or 27.3 times its 2005 net profit of 95.4 billion won on sales of 298.5 billion, according to the figures provided by the sources to Reuters on Thursday.
The entire value of the exchange is also 13 times its 2006 net profit target of at least 200 billion won -- a discount to its listed major regional peers.
Hong Kong Exchanges and Clearing Ltd. (HKEx) (0388.HK: Quote, Profile, Research) trades at 35 times forecast 2006 earnings, the Singapore Exchange Ltd. (SGXL.SI: Quote, Profile, Research) at 27 times and the Australian Stock Exchange Ltd. (ASX.AX: Quote, Profile, Research) at 23 times, Reuters calculations show.
"Relying on trading commissions for nearly 80-90 percent of its income, the KRX's earnings structure is more prone to market swings than regional peers, which have other strong sources of revenue," said Kyobo's Kim, referring to sophisticated information services and investment products. "The KRX is also not as international as HKEx or the Singapore Exchange, without a single foreign company listed on the bourse -- another key reason for discount," Kim said.
The KRX has so far been unable to attract a single foreign foreign firm to list in its exchange, despite aggressively wooing especially in China, as the mainland has become one of the world's deepest pools of potential listing candidates.
The KRX had aimed to list this year after its benchmark KOSPI <.KS11> index surged 54 percent in 2005, the biggest gain among major indexes in the region.
But the bourse operator had faced opposition from the government over issues about who would supervise the exchange and how the money raised would be used, according to market sources.
The bourse operator had previously said that the listing would help it become a major stock exchange in Asia.
($1=937.6 Won) |
