Shares in South Korea's Samsung Card soared nearly a third on their market debut Wednesday, bucking a soft wider market, as investors bet on its steady earnings and shareholding values in affiliate firms.
The listing by the country's No. 2 credit card firm has been in the spotlight as the biggest offering on the domestic bourse so far this year, and the first domestic IPO with shares set aside for foreigners following a change in listing rules.
The offering raised a larger-than-expected 576 billion won ($622 million), pricing its share sale above an indicated 40,000 won to 45,000 won range on heavy investor demand.
"We suggest a fair value of 62,000 won for Samsung Card and forecast an end-2007 market capitalisation of 6.5 trillion won at a fair price to book value of two," JP Hong, Goodmorning Shinhan Securities analyst, said in a research note on Tuesday.
The stock opened at 62,200 won, up 30% from its IPO price of 48,000 won, lifting its market value of 6.9 trillion won. The benchmark stock index shed 0.64%.
The current market price represents 14.5 times its forecast 2007 earnings, more than double that of its bigger rival LG Card. LG Card is being delisted after it was sold to Shinhan Financial Group last year in a $7.2 billion deal.
The 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.
Goodmorning Shinhan expected Samsung Card to post stable profits and retain a 10% market share in credit sales, lagging behind a 25% share by the combined Shinhan and LG Card entity.
Another factor driving the rally in Samsung Card shares was its share ownership in sister companies, including Samsung Securities and Samsung Fire and Marine Insurance. The combined book value of affiliates was 755.1 billion won at the end of March and the current market price is 920.7 billion won, according to Hyundai Securities.
In turn, five units of Samsung Group own 75.4% of the credit card unit, led by Samsung Electronics' 39%.
Samsung Card sold 12 million shares, including 6 million new shares, with 30% of the shares going to foreign investors, via the public offering. The retail portion of the offering was 103 times subscribed, attracting 5.96 trillion won, the largest ever for a private company's IPO in South Korea, according to its lead manager Korea Investment & Securities.