[Click eStock] "SK Networks, Walkerhill's Widening Deficit Forecasts Poor Earnings"

Hana Financial Investment Report
Q3 Operating Profit 36.3 Billion KRW... 55% Decrease YoY

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 7,200 KRW for SK Networks on the 29th. This is based on the analysis that the third-quarter earnings may fall short of market expectations due to the widening deficit at Walkerhill.

Third-quarter sales are expected to decrease by 26.5% year-on-year to 2.6 trillion KRW. The main cause of the decline in scale is the sluggish performance of the global division due to deteriorating trading conditions. Operating profit is forecasted to drop 55% year-on-year to 36.3 billion KRW.

It is believed that the suspension of buffet operations at Walkerhill partially contributed to the decline in room occupancy rates. Yuje-seon, a researcher at Hana Financial Investment, explained, “Since the implementation of social distancing level 2 measures from mid-August, the uncertainty in Walkerhill’s operating environment has increased. They are considering lowering to level 1 after confirming the spread of COVID-19 for two weeks following the Chuseok holiday, so the trend in confirmed cases will have a significant impact on whether operating performance recovers in the fourth quarter.”

SK Magic continues to see an increase in the number of accounts, but a decline in profit is expected due to the high base effect from the previous year and brand advertising expenses in the second half. Car Life is expected to show improved performance compared to the previous quarter due to demand recovery centered on Jeju Island during the travel peak season in the third quarter, but sluggishness in inland and airport areas is likely to act as a profit decline factor compared to the previous year. The information and communication division is expected to see a slight increase in profit compared to the previous quarter due to improved sales of new products.

Recent participation in SK Rent-a-Car’s paid-in capital increase is seen as a preemptive response to rising debt ratios and is expected to positively affect future market share maintenance and improvement in controlling net profit. The steadily increasing number of accounts at SK Magic suggests stable growth in the rental business.

Researcher Yuje-seon said, “Although uncertainty in the travel and leisure sectors is expected to ease, risks should be considered to be in a latent phase until control over COVID-19 becomes visible. It will take some time for the advantages of a diversified business portfolio to be recognized over its disadvantages.”

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