News
DL E&C achieved unprecedented success in forecasting demand for its corporate bond.
DATE 2024.07.03
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DL E&C achieved unprecedented success in forecasting demand for its corporate bond.
D-Tower, DL E&C’s Office Building in Donuimun
D-Tower, DL E&C’s Office Building in Donuimun- As a result of demand foresting of KRW 100 billion, received orders totaling KRW 805 billion
- Demand forecasting made a hit despite recent investor’s skepticism toward construction bonds
- Demand forecasting made a hit despite recent investor’s skepticism toward construction bonds
- Strengths, including industry’s top-tier financial stability, led to investment
DL E&C achieved unprecedented success in the corporate bond market. The Company announced on the 3rd that it received orders totaling KRW805 billion in the demand forecasting for the issue of corporate bonds conducted on the 2nd. Initially, the Company forecasted a total of KRW100 billion in demand for its corporate bonds, including KRW60 billion for 2-year bonds and KRW40 billion for 3-year bonds, but received about 8 times the planned amount. Given the current investor’s skepticism toward construction bonds due to the slump in real estate market, the overall downturn in the construction industry and the risk of contingent liabilities from project financing, DL E&C’s demand forecasting for corporate bond is considered to be an exceptional success.
It is analyzed that this success is attributed to DL E&C’s excellent financial stability and stable business foundation with a diverse portfolio. Recently, DL E&C was assigned an ‘AA-’ credit rating, the highest in the construction industry, and has maintained this credit rating for 6 consecutive years since 2019. Given the scarcity of AA-rated high-grade corporate bonds in the market, it is evaluated that DL E&C’s demand forecasting was able to attract investors’ attention.
Going over the results of this demand forecasting, investors also believe that DL E&C will continue to demonstrate substantial management performance based on its financial strength. Indeed, DL E&C has robust fundamentals to overcome the challenging business environment in the construction industry. It has maintained a positive net cash flow position since 2021. As of the first quarter of this year, DL E&C holds net cash of KRW1.2506 trillion on a consolidated basis, an increase of KRW189.6 billion compared to the end of last year. It also holds cash and cash equivalents of KRW2.432 trillion, and its operating cash flow also recorded +KRW277.4 billion, demonstrating unrivaled liquidity and financial stability.
On the other hand, as the Company has continued rigorous risk management, its total debt-to-total assets ratio is only 13.5%, and its debt-to-equity ratio is also 102.3%, the lowest in the industry. In terms of the size of PF guarantees, which has been a trigger for the financial crisis in the construction industry, DL E&C’s PF guarantee stands at about KRW1.5 trillion on a separate basis as of the end of the 1st quarter of 2024, which is only 38.6% of its equity capital. Especially, if excluding PF guarantee related to low-risk urban renewal projects, the actual risk related to PF guarantee is approximately KRW0.5 trillion, 13.6% of its equity capital, which is the lowest in the industry.
DL E&C has proactively worked on building a balanced business portfolio, and is maintaining its selective order-winning activities focusing on high-quality and profitable projects in the sectors of housing, civil engineering and plant this year. Additionally, the Company plans to achieve gradual profit improvement from the second half of this year based on continuous risk management and cost management.
An official from DL E&C said, “Many investors have highly evaluated out excellent market position, stable business foundation and outstanding financial stability.”, and added, “We will continue to focus on profitability-oriented substantial management and risk management to overcome various challenges in the industry, as well as met the expectations of investors.
