[Click eStock] "SK Announces Share Buyback and Cancellation... Expecting Green Energy Expansion"

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[Asia Economy Reporter Lee Myunghwan] Shinhan Financial Investment announced on the 20th that it maintains a Buy rating and a target price of 380,000 KRW for SK. This is due to expectations for successful expansion of new businesses such as advanced materials and green energy, as well as share repurchases aimed at enhancing corporate value.

According to Shinhan Financial Investment, SK is expected to repurchase treasury shares annually amounting to more than 1% of its market capitalization until 2025 to enhance corporate value. Based on the current market capitalization, approximately 180 billion KRW or more is expected to be used for share repurchases. SK is also reportedly considering partial cancellation or gradual expansion of cancellation scale for about 25% of its treasury shares. Recently, SK decided to grant treasury shares as performance rewards to the CEO and executives of affiliates, which is seen as emphasizing the role and responsibility of management in enhancing corporate value.

SK plans to use more than 30% of the recurring dividend income received from its subsidiaries as a source for shareholder dividends until 2025. Excluding one-time factors, SK’s recurring dividend income is estimated to be between 800 billion KRW and 1 trillion KRW annually, which translates to about 5,000 KRW per share considering the 30% shareholder dividend ratio.

SK also announced its policy to use profits generated from the initial public offering (IPO) process of subsidiaries and from selling some shares after listing as dividend resources. Last year, SK included profits from partial sales of SK Biopharm shares as part of its dividend funds. The annual dividend per share of 8,000 KRW last year was the highest ever, doubling compared to 2017. With planned listings of major subsidiaries such as SK Pharmteco, Siltron, and EcoPlant, Shinhan Financial Investment expects a gradual increase in dividends per share (DPS).

There is also an expectation for business expansion in bio contract manufacturing (CMO), advanced materials, and green energy. SK’s consolidated sales last year increased by 21.7% year-on-year to 98.3 trillion KRW, and operating profit turned positive at 4.9 trillion KRW. Pharmteco, which is experiencing high growth, achieved sales of about 780 billion KRW, and successfully expanded its business by acquiring the French CMO company Yposkesi in March and the U.S. gene and cell therapy CMO company CBM in December last year.

Researcher Kim Suhyun of Shinhan Financial Investment forecasted, "Investments to secure business foundations in alternative energy, environmental technology (waste), sustainable food, and carbon dioxide capture are expected to continue this year."

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