A Returner’s Successful Investment Method - Chapter 594



Only Krnovel

Episode 594 Hwaan Group (3)

Even if I say this, I know very well how much money 2 trillion won is.

It’s a huge amount of money that not only individuals, but even most large corporations have to put their souls into.

“If we decide to raise 2 trillion won, raise money from all over and get some investment, we can raise it somehow. But the real problem is that it is not the end.”

“sure?”

“Do you know what Daeho Shipbuilding’s debt ratio is?”

“How much is it?”

“690 percent. Last year’s net loss alone was 1.8 trillion won.”

“What about the amount of debt?”

“12.3 trillion won.”

“Is that all debt?”

“Fortunately, 4.2 trillion won of this is advance payment. Excluding that, it would be around 8 trillion won. “If we take over, we will have to invest about 2 trillion won more right away.”

“So it looks like KDB is rushing to sell.”

“that’s right.”

So far, the government has invested 12 trillion won in public funds to revive Daeho Shipbuilding.

If we were to invest an additional 2 trillion won here, who would like it?

Daeho Shipbuilding & Marine Engineering is the world’s third largest shipbuilding company.

Considering the size alone, it would not be surprising if the market capitalization exceeded 10 trillion won. Nevertheless, the reason the current market capitalization is 4 trillion won is because it has these problems.

As someone thought it was an affiliate of Daeho Group, the worst accounting fraud occurred a few years ago.

The amount of accounting fraud revealed at the time was 5 trillion won.

This resulted in a net loss of 5.5 trillion won in one quarter.

The loss was greater than the market cap!

If it were a normal company, it would have gone bankrupt long ago.

The reason it didn’t go bankrupt is because it is a public enterprise.

If Daeho Shipbuilding fails, there is a high risk that many people will become unemployed and the local economy will collapse.

Which government can afford this?

In addition, we have invested over 10 trillion won so far, but letting it fail is tantamount to admitting that we have failed in our policies and wasted money through taxes.

“It is impossible to run an export manufacturing business that must be globally competitive in the first place as a public enterprise.”

In the shipbuilding industry, it takes up to 10 years to receive an order, ship it, and settle the payment, so a long-term outlook is important.

However, every time the government changes, the president and executives parachute down, and each person has no choice but to take care of their share during their term, which is why the company is like this.

As the government could not continue to hold on to it, it promoted the sale dozens of times over a period of more than 20 years.

However, it failed again and again, and it has reached the present.

“So Huaan Group also gave up on the acquisition.”

Heo Min-woong nodded.

“Among the conglomerates, is there any conglomerate that has not considered acquiring Daeho Shipbuilding? Nevertheless, there is a good reason why not everyone took over.”

“Why not just manage it well and normalize it?”

“how? “Restructuring is impossible after acquisition.”

In general, when an insolvent company is acquired, intensive restructuring is carried out.

By reducing unnecessary staff and selling unprofitable businesses, you can reduce expenses to some extent and secure cash.

However, it is impossible for Daeho Shipbuilding to do this.

In the first place, why did the government invest 12 trillion won in taxes to save the company?

This is because if a company collapses, it will have a significant impact on the local economy.

But what if the government carries out restructuring and cuts people first as soon as it sells to a conglomerate?

Labor unions will rise up, and both the government and conglomerates will be criticized.

Therefore, the sale conditions include provisions prohibiting this. From the moment you take over, you have to carry on with it regardless of whether you incur a loss or not.

“If something goes wrong, even Hwaan Energy will be shaken. “If you make a mistake, you might be dragged into ant hell.”

Are there just one or two companies that went bankrupt after a merger or acquisition went wrong?

A representative example is Kumo Group.

Daeho Construction was acquired at a high price, but the entire group was disbanded a few years ago as it was unable to cover the losses.

“As you know, Hwaan Energy’s profits are small. Even so, all of it is being invested. “Our debt ratio is now at a dangerous level.”

The reason why Hwaan Energy’s stock price soared is in no way due to expectations about the future.

I’ve invested in all sorts of things, but there’s not much that’s making money right away.

Hydrogen truck sales are in full swing and demand for hydrogen infrastructure continues to increase, but there are still limits.

As money continues to be invested in factory expansion, cash is tight.

“Continue Capital will participate as FI during the acquisition. Then we will be able to reduce the cost burden.”

“Do you want to participate as a financial investor?”

“yes.”

Heo Min-woong’s eyes slightly wavered when he heard that I was going to invest money.

“Why on earth are you asking me to take over?”

“Because it’s a good company.”

Looking at what has been said so far, it seems like a company that is insolvent and about to go bankrupt, but Daeho Shipbuilding is the world’s third largest shipbuilding company.

For reference, the first place is Daeyeon Heavy Industries and the second place is Yuseong Heavy Industries, all Korean companies.

“As you know, Daeho Shipbuilding specializes in LNG ships.”

It is necessary to clearly distinguish terms here.

LNG carriers transport LNG in tanks, and LNG propulsion ships use LNG as fuel.

Daeho Shipbuilding builds both.

“Given the current environmental regulations, won’t the number of orders for LNG and hydrogen-related ships increase in the future?”

Of course, everyone makes these predictions.

But how good would it be if things in the world went just as predicted?

“Can Daeho Shipbuilding bring that? These days, Chinese and Japanese shipbuilders are no slouch either.”

Japan was originally a powerhouse in the shipbuilding industry.

Although it was overtaken by Korea and went down the road, it still possesses excellent technology. Recently, orders have been increasing thanks to the weak yen.

And Chinese shipbuilders have been sweeping up global ship orders for several years with their low-price offensive.

Daeho Shipbuilding & Marine Engineering began taking on low-price orders due to competition with Chinese companies, but faced a situation where the more ships it made and sold, the more it was making a loss.

In addition, Chinese companies that have accumulated capital and technological capabilities have recently been spending on high value-added ships such as LNG ships.

“The reason we are losing money now is because the business conditions are bad and we are doing poorly, but we are good at making ships. And wouldn’t there be good business synergy with Hwaan Energy?”

“synergy?”

“As the hydrogen economy becomes more active, transportation of hydrogen also becomes important. Daeho Shipbuilding & Marine Engineering is suitable for building hydrogen carriers and hydrogen propulsion ships.”

In addition, Daeho Shipbuilding & Marine Engineering also builds offshore wind power generation and offshore plants.

In this way, hydrogen can be produced in the sea and transported by ship around the world.

“Like you said, we might be able to create synergy in the long run. But on the other hand, in the short term, you have to endure losses and endure.”

“So that’s good.”

“huh?”

“In a favorable wind, it doesn’t matter who the captain is. But when a storm approaches, it becomes important who is the captain.”

Daeho Shipbuilding & Marine Engineering has a small market cap, but its scale is larger than Hwaan Energy.

Therefore, if Hwaan Energy takes over Daeho Shipbuilding, it will have to make every effort to normalize management from then on.

It won’t be easy to change the captain holding the helm when a storm rages.

And after weathering the storm well, no one will be able to talk about changing the captain.

Heo Min-woong asked with a surprised expression.

“Are you intentionally putting the company in crisis?”

I shook my head.

“What a crisis. “This is an opportunity.”

What I hate most is when an owner sacrifices minority shareholders to protect management rights.

The reason I am making this suggestion is not only because of Heo Min-woong. This is because it is beneficial to the interests of shareholders.

I said firmly.

“The Korean shipbuilding industry boom will definitely come.”

* * *

Heo Min-woong, who broke up with Han Mi-ru, returned to work instead of going home.

Originally, I was planning to go home right away, so I brought along my attendant and called a taxi.

He paused for a moment and looked at the headquarters building.

As Hwaan Energy mainly conducts overseas business, lights were on throughout the building even though it was past midnight.

Employees would be working under that light.

In the past, it was easy to think about companies. However, now we know very well that it is a community made up of many people.

Their fate also changes depending on what decision the president makes.

When Heo Min-woong entered the building, the security guard was surprised to see him.

“omg! president! “What are you doing at this hour?”

“I have some business to run. take care.”

Heo Min-woong headed straight to the president’s office.

First, he drank some water to calm himself down.

Although I drank a lot, strangely enough, my mind was intact.

To be exact, I woke up the moment I heard Han Miru’s words earlier.

“Taking over Daeho Shipbuilding… … .”

It was truly an unexpected proposal.

He took off his coat, sat down, and called the secretary’s office.

Since the secretary’s office was open 24 hours a day, the staff member who was on standby came immediately.

“Did you call me, boss?”

“Please organize and bring Daeho Shipbuilding-related materials right away.”

“All right.”

Hwaan Group had previously considered acquiring Daeho Shipbuilding several times.

As Hwaan Energy was also involved, there was already data in-house that had been carefully reviewed by experts and even completed due diligence.

Heo Min-woong looked at the data one by one.

‘No matter how much I think about it, it’s impossible.’

The business synergy is definitely good.

However, I was not sure how many years it would take to normalize the company and whether I would be able to make a profit by getting out of low-cost orders.

Even if the group provides support, if Hwaan Energy were to take over on its own, it would inevitably be criticized as an unreasonable acquisition.

After review and analysis by numerous experts within the group, the acquisition was abandoned.

“But are you asking me to take over this?”

If someone else had said this, I wouldn’t have even heard it.

but… … .

If it came from Han Miru’s mouth, it would be a different story.

Heo Min-woong recalled what Han Mi-ru said when they first met.

‘I came to save Mr. Heo Min-woong.’

If he hadn’t believed those words, he wouldn’t be here now.

Fortunately, he followed Han Miru’s words and eventually survived. And now he was looking even higher.

What should I do?

Hwaan Energy is still doing well.

There is no reason to jump into a risky acquisition.

‘It’s funny that an affiliate company steps forward and takes over on its own when the group has given up on the acquisition.’

What would happen if he moved alone?

Not only Hwaan Energy, but the entire group will be turned upside down.

This is something that no sane person should ever do.

Everyone will be against it, and there is a high risk that shareholders who have supported it so far will turn their backs on it.

While Heo Min-woong was pondering over the data, the sun suddenly rose outside the window.

After making his decision, Heo Min-woong contacted the secretary’s office.

[Yes, boss.]

“Convene an executive meeting.”

[When are you talking about?]

“Right now.”