What Happened? AFAEC’s Decision to Issue a ₩10.1 Billion CB

On July 17, 2025, AFAEC, a company specializing in semiconductor back-end processing, announced a private placement of ₩10.1 billion in Convertible Bonds (CBs). This move aims to secure short-term liquidity and fund future growth engines. Here are the key details:

  • ✔️ Issuance Size: ₩10.1 Billion
  • ✔️ Conversion Price: ₩2,323 (adjustable down to ₩1,627 if the stock price falls)
  • ✔️ Interest Rates: 0.0% coupon rate, 3.0% yield to maturity
  • ✔️ Key Investors: Private equity funds affiliated with NH Investment & Securities, GVA, etc.

In simple terms, AFAEC is borrowing money from investors with an option for them to convert the debt into company stock later. This allows the company to raise capital without an immediate interest burden (0% coupon rate).

Why Now? Persistent Poor Performance and the Need for Growth

The backdrop to this fundraising is the challenging reality AFAEC faces. The company is experiencing a significant performance decline due to the global semiconductor market slump and reduced orders from major clients.

  • 📉 Plummeting Revenue and Profit: Compared to 2022, 2024 revenue fell by about 30%, and operating profit plunged by a staggering 97%. The slump continued with a net loss in Q1 2025.
  • 📉 Worsening Profitability: The operating profit margin, which was 28% in 2022, collapsed to 2.36% in 2024.

To overcome this crisis, AFAEC desperately needed to secure operating funds and raise capital to invest in new growth strategies, such as entering the non-memory semiconductor market and providing Turn-Key Solutions.

So What? Opportunities and Threats for Investors

This CB issuance is a double-edged sword for AFAEC. It can help navigate the short-term crisis, but long-term success is not guaranteed.

The Upside (Opportunities)

  • 👍 Enhanced Financial Stability: The ₩10.1 billion cash infusion alleviates short-term financial pressure.
  • 👍 Fuel for Growth: The company has secured the necessary capital to invest in its future, including expansion into the non-memory market.

The Downside (Threats)

  • 👎 Risk of Stock Dilution: If all CBs are converted to stock, the total number of shares will increase by approximately 9.31%, potentially diluting the value for existing shareholders.
  • 👎 Potential Debt Burden: If the stock price remains below the conversion price and conversion does not occur, the bonds will have to be repaid with a 3.0% yield at maturity, remaining as debt.
  • 👎 External Environment Risks: Macroeconomic factors such as a rising KRW/USD exchange rate, increasing gold prices (raw material cost), and a high-interest-rate environment remain significant burdens.

Investor’s Action Plan: What to Monitor

So, what should investors keep an eye on? AFAEC’s long-term stock trajectory depends on these four factors:

  1. Tangible Results from Growth Strategies: Investors must check quarterly reports for concrete signs of success, such as new contracts or revenue from the non-memory and Turn-Key Solution initiatives.
  2. Signals of a Semiconductor Market Recovery: The speed of the global semiconductor market’s recovery is directly linked to AFAEC’s performance improvement. Monitor industry news and indicators closely.
  3. Cost Management Capability: Assess how effectively the company mitigates rising raw material costs (like gold) by examining changes in its operating profit margin.
  4. Quarterly Earnings Announcements: Ultimately, everything is proven by the numbers. It is critical to see if upcoming quarterly results signal a turnaround or a continuation of the slump.

In conclusion, while this CB issuance provides AFAEC with a platform to overcome its current crisis, true enhancement of corporate value hinges on fundamental performance improvement and the success of its growth strategies. This is a time for careful and diligent monitoring.