Skylife Soars on M&A Expectations

[Asia Economy Reporter Song Hwajeong] Skylife is experiencing growing expectations for mergers and acquisitions (M&A), with its stock price touching 10,000 won intraday, marking a new high.

According to the Korea Exchange on the 29th, Skylife's stock price rose to 10,700 won intraday, recording a 52-week high. It has increased by 11.48% since the beginning of this month.

The recent strength is interpreted as being due to M&A momentum. Previously, Skylife was selected as the preferred bidder for the sale of Hyundai HCN. Hong Sejong, a researcher at Shinhan Financial Investment, stated, "Hyundai HCN is a cable operator with 1.3 million broadcasting subscribers. Its consolidated sales this year are estimated to be around 290 billion won, operating profit around 41 billion won, and net profit close to 40 billion won annually." He added, "If the value per subscriber is around 350,000 won and the total enterprise value (excluding cash) is about 460 billion won, the acquisition is definitely a sound strategy." Hong also noted, "If this acquisition succeeds, Skylife's total sales will increase by more than 50%, and operating profit will increase by nearly 50%."

In particular, this acquisition is expected to solidify the subscriber base and enhance corporate value. Ahn Jaemin, a researcher at NH Investment & Securities, explained, "Through this acquisition, Skylife will expand its subscribers from the current 4.14 million (as of the end of Q1 this year) to 5.45 million, strengthening its subscriber base." He added, "The increase in subscribers will lead to higher sales, expansion of bundled service subscribers combining high-speed internet and wireless, and a resulting effect of reducing churn rates. Furthermore, it will secure advantageous positions in future content procurement and home shopping transmission fee negotiations." Considering the recent stock market situation where the value of cash holdings is heavily discounted, if sales and operating profit increase through this M&A, it will ultimately contribute to an increase in corporate value. Skylife currently holds 321.5 billion won in cash and cash equivalents.

The M&A momentum is expected to have a positive short-term impact on the stock price. Researcher Ahn said, "This M&A will have a positive short-term effect on Skylife's stock price," but added, "However, the synergy effects will fully materialize after 2021."