Stocks of Doosan Infracore Co. traded at a yearly high on Thursday as the country’s leading construction equipment maker is set to benefit from US
President-elect Donald Trump’s proposed plan to spend massive amounts of money on infrastructure, its cost-cutting efforts and the market debut of an affiliate, industry sources said Thursday.
Doosan Infracore changed hands at 10,000 won ($8.50) on the Seoul bourse as of 10:31 a.m., up 3.63 percent from the previous session’s close, hitting a 52-week high.
Doosan Infracore has been on a sharp rise since the US presidential election, rising more than 25 percent over the past week, amid optimism that the company and its affiliate Doosan Bobcat Inc. are positioned to see a rise in sales as the incoming US administration plans to spend $1 trillion on infrastructure — tunnels, roads and ports.
Also, Doosan Bobcat’s market debut, slated on Friday, is expected to help improve Doosan Infracore’s financial status, they said.
“We have to look at a rise in the value of Doosan Infracore’s stake in Doosan Bobcat which will get a boost from America’s planned infrastructure spending and corporate tax cut,” said Yoo Jae-hoon, an analyst at NH Investment & Securities.
The analyst said Trump’s victory could become a windfall for Doosan Infracore and its affiliate, although it does not mean massive orders over the coming months.
Another driving force for Doosan Infracore’s stock price rally is Doosan Bobcat’s initial public offering worth 900 billion won, which would mark the country’s second-largest market debut of the year. Doosan Bobcat priced its IPO at 30,000 won per share.
Doosan Infracore and Doosan Engine Co. own a majority 78.4 percent stake in Doosan Bobcat, which operates 31 subsidiaries in 20 countries. Doosan Bobcat is a leading player in the small construction machinery sector in the United States.
Doosan Infracore will hold some 59 percent in Doosan Bobcat after the IPO. Doosan Infracore is expected to raise some 300 billion won from the affiliate’s market debut, according to the industry sources.
Doosan Infracore’s financial status is also helped by its improving business performance, according to Hi Investment & Securities.
“Given the IPO size, Doosan Infracore’s stake in Doosan Bobcat is valued at 1.8 trillion won,” said Choi Kwang-shik, an analyst at Hi Investment & Securities. “Its business is on a recovery track largely thanks to solid demand in China,” the analyst said.
The IPO plan is part of the Doosan Group’s efforts to improve its financial status. The power-to-construction equipment conglomerate has raised trillions of won by selling assets in recent years to survive a prolonged slump in the construction industry.
In 2007, Doosan Infracore acquired Bobcat and other construction equipment units from North Carolina-based Ingersoll Rand PLC for $4.9 billion.
Hit by a protracted slump in the construction sector, Doosan Infracore logged a loss of 859 billion won last year with its operating income dropping 94 percent on-year to 27.4 billion won.
Doosan Infracore has been seeking to sell its assets to tide over increased costs and ballooning losses. Doosan Infracore sold its machine tool business unit to local private equity fund MBK Partners for 1.13 trillion won, and reduced its workforce through early retirement schemes.