South Korea’s leading office software developer Hancom Group plans to diversify its business portfolio through aggressive mergers and acquisitions and bolster its existing businesses by creating synergy with new businesses.
As part of efforts to pursuit its plans, the company aims to list SanCheong Co., the nation’s top protective gear maker it acquired in July, by 2019.
“We will expand our overall business spectrum and raise value of the existing businesses at the same time,” said Hancom Group Chairman Kim Sang-cheol during an investor relations (IR) session on Wednesday. He also announced an initial public offering (IPO) plan for SanCheong by the first half of 2019 with an aim to achieve 660 billion won ($582 million) in market capitalization.
Hancom took over SanCheong at 265 billion won in July in a bid to diversify its business. It directly invested 80 billion won and raised 65 billion won from financial institutions. Local private equity fund Stick Investment Co. also holds a 50 percent stake after it invested 120 billion won. Part of the proceeds from the company’s IPO will be used to repay the loans it took to take over the company.
Kim said he will keep looking for firms to acquire with the funds raised by the IPO and stake sales. Welcoming the company’s latest plans, investors have rushed to pick up Hancom shares, lifting its stocks 7.74 percent on Wednesday from the previous session to finish at 18,100 won. Its stocks gained 14.9 percent over the last three months. Shares were further on Thursday to close 1.1 percent up at 18,300 won.
Hancom plans to expand exports of SanCheong’s protective equipment and add new product lines for industrial and residential use. SanCheong currently supplies its products to military as well as fire and disease prevention authorities only in Korea. It also expects a huge synergy effect with SanCheong by incorporating its Internet of Things (IoT) technology to SanCheong’s products to enable them to collect information of surrounding area, check user’s body conditions and use augmented reality (AR) or virtual reality (VR) technology. Hancom’s earnings are expected to improve in the fourth quarter as the earnings of SanCheong with an estimated 33 billion won in operating profit on sales of 122 billion won will be reflected into Hancom’s income statement.
Hancom’s own software business has also been showing strong performance. It recorded profits for 58 consecutive quarters and its operating profit exceeded 10 billion won for the first time in the second quarter. It is estimated to have recorded 8.1 billion won in operating profit for the third quarter ended September, up 25.2 percent from the same period last year. It aims to raise its market share from current 30 percent to 50 percent in the local market.
By Chung Woo-sung and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]