Activist fund Blue Orca Capital plans to acquire a stake in DN AUTOMOTIVE. This is due to expectations that DN AUTOMOTIVE will enhance its asset value through the initial public offering (IPO) of its subsidiary DN Solutions (formerly Doosan Machine Tools). Blue Orca Capital believes the listing will provide investors with high short-term revenue.
According to a report released by Blue Orca Capital on the 10th, the company plans to purchase equity in DN AUTOMOTIVE, which specializes in manufacturing machine tools.
The background for the equity acquisition is the listing of DN Solutions, a subsidiary of DN AUTOMOTIVE. Blue Orca Capital estimates that the value of DN Solutions after the listing could reach between 5 trillion won and 6 trillion won, which is five times the current market capitalization of DN AUTOMOTIVE.
Currently, a premium of double the corporate value of DN AUTOMOTIVE has arisen, presenting a significant opportunity for profit realization, according to the fund’s officials. Blue Orca Capital analyzed that “if we consider the overall value assessments, even with the planned IPO of DN Solutions, the current corporate value of the consolidated company will be sufficiently exceeded, providing investors with revenues of 194% to 294%.”
Additionally, it noted that last year’s operating profit (EBIT) margin for DN Solutions was about 20%, which is four times the average of competitors. It further elaborated that a margin of about 20% is comparable to the highest profit margin machine tool companies in the Asia-Pacific market.
Meanwhile, the fund cited a report from Hana Securities, noting that the parent company DN AUTOMOTIVE is trading at a price-to-earnings ratio (PER) of 3.1, emphasizing that this is “an excessively low figure.”
DN Solutions is the number one company in the domestic machine tool market and the third largest in the global metal cutting machine market. Previously, DN Group’s holding company, DN AUTOMOTIVE, acquired DN Solutions from MBK Partners in 2022.
DN Solutions aims to conduct demand forecasting for institutional investors at the end of this month and general subscriptions in early next month, targeting an IPO on the Korea Composite Stock Price Index (KOSPI) in the first half of the year.