[Click eStock] "SK Networks, Market Capitalization Falls Below Gas Station Sale Price"

[Asia Economy Reporter Minji Lee] Hyundai Motor Securities maintained a buy rating on SK Networks on the 24th, stating that the company has entered an extremely undervalued phase, and set a target price of 7,100 KRW.

Recently, the stock market has been plunging due to the adverse effects of the novel coronavirus disease (COVID-19), causing some companies to fall below their intrinsic value. SK Networks' market capitalization currently falls below 1.1 trillion KRW, which is even lower than the 1.3321 trillion KRW in cash earned from the sale of directly operated gas stations, indicating that it has entered an extremely undervalued phase.

SK Networks has completed the sale of its directly operated gas stations to the Hyundai Oilbank-KORAMCO Asset Trust consortium and plans to finalize the business transfer by June 1. Accordingly, along with the sale of low-profit businesses carried out since 2016, it is judged to have established a growth strategy focused on core businesses such as Car-Life (rental cars) and SK Magic (rental services).

The company's business structure is relatively less affected by COVID-19. Accordingly, sales in the first quarter of this year are expected to decrease by 9% year-on-year to 2.9857 trillion KRW, while operating profit is expected to increase by 32.5% during the same period to 40.4 billion KRW. Operating profit is projected to improve profitability due to performance growth in the core businesses of mobility and home care rental services.

Jongryul Park, a researcher at Hyundai Motor Securities, explained, "The mobility sector will see increased profits due to enhanced bargaining power and reduced competition," and added, "The home care rental service sector is expected to improve performance due to the net increase in SK Magic’s accounts and the rise in average revenue per user (ARPU)."

Researcher Park continued, "This month, the discontinuation of the low-profit energy marketing business will generate a gain of 150 billion KRW from the sale, positively impacting performance improvement," and said, "The plan to repurchase treasury shares at a 9% weighting relative to market capitalization over the next three months will have a positive effect on enhancing shareholder value."

This content was produced with the assistance of AI translation services.