SK Telecom, Stock Price Struggling Despite Numerous Positive Factors

[Asia Economy Reporter Park Jihwan] SK Telecom is not seeing its stock price gain momentum despite many positive factors such as strong 5G subscriber growth, solid earnings, and the highlighted value of its subsidiaries.

According to the Korea Exchange on the 11th, SK Telecom's stock price rose only 1.7%, from 234,000 KRW at the beginning of the year to 238,000 KRW as of the previous trading day. Considering that the KOSPI index's annual return over the past year is 31.94%, this performance falls far short of the market return.

In the market, there is an assessment that SK Telecom's current stock price remains undervalued, especially when considering the value of its subsidiaries. Starting next year, subsidiaries such as One Store, 11st, and ADT Caps will consecutively go public through initial public offerings (IPOs). One Store has rapidly increased its market share by recording sales growth for nine consecutive quarters as of the third quarter this year. 11st is also expected to see an increase in e-commerce market share and profitability through its partnership with Amazon. The combined target market capitalization for the subsidiaries' IPOs is projected to reach a total of 15 trillion KRW.

Additionally, the market capitalization of SK Hynix, in which SK Telecom currently holds a 20% stake, is around 85 trillion KRW, lending further credibility to the undervaluation argument. Considering SK Telecom's market cap is about 19.5 trillion KRW, the value of the headquarters and non-telecom subsidiaries is analyzed to remain in an undervalued range.

The earnings trend and outlook are also positive. In the third-quarter earnings announcement, operating profit turned to an increase compared to the same period last year for the first time in 14 quarters since the first quarter of 2017. The new business sectors such as media, security, and commerce continued solid growth, and for the first time in a quarter, the combined operating profit exceeded 100 billion KRW. The annual operating profit for this year is also expected to increase by 14.7% to 1.273 trillion KRW from 1.11 trillion KRW last year.

In particular, driven by strong wireless 5G subscriber growth, the number of 5G subscribers next year is likely to be raised to around 12 million. In this case, the average revenue per user (ARPU) increase per service subscriber will reach 5%. Kim Hongsik, a researcher at Hana Financial Investment, forecasted, "Meaningful sales results will be achieved through 5G, which is the area of greatest investor interest, and subsequently, stock price increases are expected."

The evaluation of the dividend policy is also positive. Next year, as various subsidiaries in different fields go public and pay dividends, SK Telecom plans to link this to interim dividends. Jang Minjun, a researcher at Kiwoom Securities, said, "With increased profitability from strong wireless subscriber growth and continued earnings growth of non-telecom subsidiaries, the interim dividend amount next year is expected to be maintained or increased to the level of the annual dividend per share."

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