SK Telecom Becomes a National Stock... Dividend Provides Stock Price Clue [Cha Min-young's Post-it]

SKT 2.0 Era... Restructured into 2 Companies
SK Telecom Stock Price at 60,000 Won After Split
Surviving Company Market Cap Expected Between 13 Trillion and 19.5 Trillion Won

SK Telecom SKT Tower Exterior View

[Asia Economy Reporter Cha Min-young] #. The new SK Telecom, transforming into an artificial intelligence (AI) and digital infrastructure specialized company in the 'SKT 2.0 era,' is challenging to become a 'national stock' through a 5-for-1 stock split. Following the split, expectations for dividends and new businesses brighten the stock outlook.

SK Telecom, reorganized into two companies?SK Telecom (the surviving company) and SK Square (the newly established company)?will each be re-listed and change-listed on the KOSPI market on the 29th. Previously, SK Telecom's stock trading was suspended for one month from October 26 to November 26.

With the 5-for-1 stock split, SK Telecom's par value will decrease from the existing 500 won to 100 won. The total number of issued shares will increase from the current 72,060,143 shares to 360,307,150 shares. For example, a shareholder holding 20 shares of SK Telecom will have 100 shares after the split, a fivefold increase. According to the approximately 6-to-4 split ratio, shareholders will receive 60 shares of the surviving company and 39 shares of the newly established company. Fractional shares below one share will be converted to cash based on the closing price on November 29.

The securities industry expects the stock price and market capitalization on the change-listing date to be 61,900 won and 13.5 trillion won, respectively. The closing price on the last trading day before the suspension was 309,500 won. A Samsung Securities analyst explained, "This is the result of considering the 5-for-1 stock split par value and the split ratio of SK Telecom and SK Square based on net asset book value."

Stock splits are generally used to increase participation by small shareholders and expand the circulating shares. This is known as the 'national stock' effect. For example, Samsung Electronics and Kakao have previously conducted 50-for-1 and 5-for-1 stock splits, respectively. SK Telecom stated through its newsroom, "We expect the proportion of small shareholders to increase significantly in terms of shareholder composition through the stock split. We anticipate the shareholder composition will approach that of a national stock." However, a stock split itself does not fundamentally change corporate value.

The securities industry is focusing on total dividends and new business performance. Earlier, SK Telecom announced in August, "Based on the separate performance of the surviving company from 2021 to 2023, the total dividend amount will be determined at 30-40% of 'EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) minus CAPEX (Capital Expenditure).'" Including CAPEX in the dividend formula means that the scale of CAPEX investment could become a variable for dividends. This year, regardless of the split, SK Telecom plans to maintain at least last year's level (720 billion won). SK Telecom also introduced quarterly dividends starting from the second quarter.

Expectations for dividends and other factors brighten the stock outlook. There is a reaction that SK Telecom's market capitalization will increase compared to before the stock split. After the change listing, the expected market capitalization of SK Telecom (the surviving company) is ▲Samsung Securities 14 to 16 trillion won ▲Yuanta Securities 14 to 16 trillion won ▲Hana Financial Investment 13 to 18 trillion won ▲Daishin Securities 19.5 trillion won ▲NH Investment & Securities 16.8 trillion won. Since the market capitalization was estimated at 13.5 trillion won on the change-listing date of the 29th, most see significant upside potential.

Minha Choi, a Samsung Securities analyst, said, "SK Telecom's dividend yield will increase to around 5.3%, compared to 3.4% in 2021 and a five-year average of 4.2%. The band could trend upward depending on the performance of new growth engines such as subscription marketing, metaverse, and enterprise." Hong-sik Kim, a Hana Financial Investment analyst, noted, "Although SK Telecom is a pioneer, its profit size is not large compared to competitors, so it is highly likely that the market capitalization will be evaluated based on the total dividend value."

Led by new CEO Yoo Young-sang, SK Telecom aims to be an 'AI and Digital Infrastructure Company,' focusing on three core businesses: wired and wireless communications, AI-based services, and digital infrastructure services. The plan is to increase annual sales from 15 trillion won in 2020 to 22 trillion won by 2025. The consensus for this year's consolidated annual sales is about 19.55 trillion won, and it is expected to surpass 20 trillion won comfortably next year. Subsidiaries positioned to create synergy include SK Broadband, SK Telink, PS&Marketing, F&U Credit Information, ServiceTop, ServiceAce, and SK O&S.

Meanwhile, SK Square, responsible for semiconductor and ICT investments, is led by Vice Chairman and CEO Park Jung-ho. Its subsidiary, One Store, filed for preliminary review for listing on the Korea Exchange's KOSPI market on the 26th, becoming the first among subsidiaries to announce an initial public offering (IPO). If it passes the exchange's listing eligibility review, it will proceed to the public offering process. The number of shares to be offered is 6.66 million, with a total of 26,229,925 shares to be listed. The exchange must notify the review results within 45 business days after the application.

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