[Click eStock] "SK Telecom, Dividend Reduction Unlikely... Buy Expansion"

Published 17 Mar.2020 07:43(KST)

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 330,000 KRW for SK Telecom on the 17th, stating that a dividend reduction is practically impossible.

[Click eStock] "SK Telecom, Dividend Reduction Unlikely... Buy Expansion"

Looking at SK Telecom's recent stock price, many investors are concerned about a dividend cut this year. This is because the company mentioned in a conference last quarter that it needs to reconsider its dividend payment policy. However, this should be understood as a change in dividend policy, not a reduction in dividends.

Hongshik Kim, a researcher at Hana Financial Investment, said, “Dividend policy is calculated based on medium- to long-term profit forecasts, and the company's operating profit outlook for next year is positive, so the possibility of reducing dividends is slim,” adding, “Going forward, interim dividends will be paid based on dividend inflows from subsidiaries, and year-end dividends will be paid based on the cash flow of the headquarters' telecommunications division.”

SK Telecom's dividend per share is expected to remain at last year's level of 10,000 KRW this year. This is because a meaningful net increase in 5G subscribers is expected from May, and operating profit improvement is anticipated from the third quarter. Although SK Hynix's performance may decline due to COVID-19, its dividends are expected to gradually increase.

Furthermore, assuming that the subsidiaries' profits increase until 2022, an increase in interim dividends is expected in 2021. Researcher Kim said, “Considering the value of subsidiaries, the current stock price is excessively undervalued,” and predicted, “Given the current market capitalization of SK Hynix, T-Broad, ADT Caps, 11st, and the telecommunications division, the company's stock price has a high potential for a sharp rise.”