Shares of South Korean builders with expertise in nuclear plant construction are on an upward trajectory. With traditional building and civil engineering businesses squeezed by a slump in the domestic housing market and stagnant spending on social overhead capital (SOC), construction companies are finding a way forward through specialized plants.
Daewoo Engineering & Construction (047040) closed at 18,670 won on the 28th, up 7.05% from the previous session, according to the Korea Exchange. Hyundai Engineering & Construction (000720) and GS E&C (006360) also finished higher, rising 1.82% and 2.02%, respectively. All three have posted steep gains this year compared with the end of last year. Daewoo E&C has risen fivefold from its 3,820-won close on the final trading day of last year, while Hyundai E&C has gained more than 75% over the same period. GS E&C is up 79.4% this year.
All three builders have strengths in nuclear plant construction. Daewoo E&C has served as lead contractor for the Dukovany nuclear project in the Czech Republic, while Hyundai E&C has carried out engineering, procurement and construction (EPC) work on numerous nuclear projects, including the Barakah plant in the United Arab Emirates. GS E&C worked on the Shin-Hanul No. 1 and No. 2 reactors in South Korea.
The odds of Korean builders winning overseas nuclear orders have been improving. Daewoo E&C is nearing a final contract for the Czech project, and Hyundai E&C has signed a basic design contract with U.S.-based Fermi America for the construction of four large reactors. Share prices have gained further momentum on reports that the first investment agreement South Korea's government is set to sign with the U.S. government will include plans to build eight nuclear reactors in the United States. The two governments are discussing a plan to build eight new reactors in the U.S., two of them based on Korean designs.
"With the housing market in a slump and SOC spending stagnant, builders are finding it hard to secure growth drivers at home," a securities industry official said. "Companies with the potential to advance their overseas businesses, centered on specialized plants, will continue to draw attention."
