[Funding] Seongji Construction Raises Operating Funds Through Par Value Capital Increase

Unlisted Company’s Book Value Per Share Falls Below Par Value
Key Issue Is Whether Major Shareholders Other Than Largest Shareholder Will Participate

[Asia Economy Reporter Hyungsoo Park] Seongji Construction plans to raise operating funds through a rights offering as its sales surged in the first quarter of this year. The issuance price per share is set at the par value due to the valuation falling below the par value.

According to the Financial Supervisory Service on the 10th, Seongji Construction will issue 3 million new shares to raise 15 billion KRW. After the rights offering, new shares will be issued at a ratio of 0.519 shares per existing share through a third-party allotment of unsubscribed shares.

As an unlisted company, Seongji Construction commissioned Dayul Accounting Corporation to conduct a valuation for the new share issuance price. The net asset value before goodwill, calculated by subtracting total liabilities of 29.2 billion KRW from total assets of 53.8 billion KRW, was 24.5 billion KRW. Dividing this by the total number of issued shares, 4.98 million, resulted in a per-share value of 4,919 KRW. Dayul Accounting applied 80% of the net asset value per share, estimating the share value at 3,935 KRW. However, under Article 330 of the Commercial Act, new shares cannot be issued below par value, so Seongji Construction’s board decided to set the issuance price at the par value of 5,000 KRW.

Seongji Construction recorded sales of 59.7 billion KRW and an operating loss of 6.5 billion KRW last year. In 2020, sales were 57.6 billion KRW with an operating loss of 4.5 billion KRW. In the first quarter of this year, sales amounted to 12.8 billion KRW with an operating loss of 1.6 billion KRW. Although sales increased by 111.9% year-on-year, the company did not return to profitability, which is why earnings per share were not reflected.

As of the end of the first quarter, the debt ratio stood at 170.9%, with a current ratio and debt dependency ratio of 130.0% and 13.4%, respectively. There are a total of 29 ongoing lawsuits as of the end of the first quarter, with 17 cases where the company is the defendant amounting to a total claim value of 7.6 billion KRW.

Seongji Construction plans to use the 15 billion KRW raised through the capital increase as operating funds. The funds will be allocated to operating expenses for the Uijeongbu housing development project and the Yeongdeungpo housing project, with disbursement planned through June next year. The company explained that it has expanded its business operations in the first half of this year and encountered numerous development opportunities, emphasizing this as the reason for raising funds through the rights offering.

The largest shareholder of Seongji Construction is Daewoo Shipbuilding & Marine Engineering Construction, holding a 25.23% stake. Other major shareholders with more than 5% stakes include JW Asset Management (13.83%), Billion (11.84%), and MGB Partners (6.85%).

This content was produced with the assistance of AI translation services.