HMM container carrier (HMM)
HMM container carrier (HMM)

Shares of HMM, South Korea's top container carrier, sharply rose on Monday, following its announcement of a roughly 2 trillion won ($1.45 billion) share buyback and cancellation plan.

The Kospi-listed company closed trading at 23,650 won, up 7.01 percent from the previous session, according to the Korea Exchange. The stock had risen as high as 24,500 won earlier in the session.

On Thursday, which was the previous trading day, HMM announced that it would repurchase and cancel 81.8 million of its shares to boost shareholder value, allocating 2.14 trillion won for the scheme.

The offer price represents a premium of roughly 19 percent over the previous session’s closing price of 22,100 won. The tender offer runs until Sept. 12.

The share buyback plan comes amid the push to sell the company with a market capitalization of 24.5 trillion won.

Following a liquidity crisis in 2016, HMM has been under the control of state-run entities. The Korea Development Bank and the Korea Ocean Business Corp. currently hold 36 percent and 35.7 percent of the company’s shares, respectively.

By reducing the number of outstanding shares through the treasury cancellation scheme, HMM can decrease the volume that future acquisition candidates would need to take on, easing the burden of a potential sale.

Meanwhile, despite the large-scale shareholder return scheme, analysts remain cautious on the stock’s outlook.

"Following the buyback plan, a decline in share price is inevitable as the stock lacks upward momentum," Hana Securities analyst Ahn Do-hyun said.


silverstar@heraldcorp.com