DS Dansuk: Block Deal Sale by Stonebridge Capital

• After the market close on 28 May, it was announced that Stonebridge Capital plans to conduct a block deal sale of a portion of its stake in DS Dansuk.

• This deal involves 210,000 to 290,000 shares of DS Dansuk. The block deal price range is from 99,800 won to 101,400 won, which represents 7.06% to 8.52% discount.

• After this second block deal, there will be further overhang concerns about additional sales of DS Dansuk by Stonebridge Capital in the coming months.

After the market close on 28 May, it was announced that Stonebridge Capital (a Korean private equity firm) plans to conduct a block deal sale of a portion of its stake in DS Dansuk (017860 KS). This is the second block deal sale of the company since the first block deal last April. DS Dansuk currently has 5.86 million shares outstanding so the block deal sale represents about 3.6% to 4.9% of its outstanding shares.

The block deal sale involves 210,000 to 290,000 shares of DS Dansuk, depending upon demand. The block deal price range is from 99,800 won to 101,400 won, which represents 7.06% to 8.52% discount to the closing price on 28 May (109,100 won). The potential deal size ranges from 21 billion won to 29.4 billion won. Korea Investment & Securities is the main banker in this deal.

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Conclusion First

We are negative on the block deal sale of DS Dansuk shares by Stonebridge Capital due to two main reasons. First, there are continued overhang concerns after this block deal sale as Stonebridge Capital could sell more shares after this block deal sale. Second, the company reported disappointing 1Q 2024 results. It had sales of 218.5 billion won (down 8.1% YoY) and operating profit of 7.5 billion won (down 48.9% YoY) in 1Q 2024.

Photo by Possessed Photography on Unsplash

Company Background

Established in 1984, DS Dansuk is an eco-friendly company with three core businesses including bio energy, battery recycling, and plastic recycling.

a) Bio Energy Business - The company's bio energy business is mainly involved in producing and selling biofuel. The main customer target markets for biofuel include oil refineries, shipping, and power generation. The company produces different types of biofuel including bio diesel (oil refinery, vehicle use) and bioheavy oil (power generation), and biomarine oil (marine oil).

DS Dansuk is the largest domestic production company with an annual biodiesel production capacity of more than 300,000 tons. The company's bio diesel supply market share to domestic oil refineries is around 15%, ranking third in the industry.

b) Battery Recycling Business - The battery recycling unit collects waste lead acid batteries (waste batteries) generated around the world to recycle metal lead. Lead acid batteries are less expensive than lithium-ion batteries and have effective usability for electrical applications. In addition, as the waste battery recycling market is expected to grow in earnest due to the spread of electric vehicles around the world, and the company is preparing a lithium ion battery recycling business based on its experience and know-how in lead battery recycling.