[Click eStock] "SK Telecom, Focus on Non-telecom Growth"

Media, Security, E-commerce and Other Non-Telecom Sectors Increasingly Contribute to Operating Profit
Subsidiary IPO Expectations Rise... Revaluation of Equity Value
Dividend Enhancement Also Worth Noting

[Asia Economy Reporter Minwoo Lee] SK Telecom's operating profit contribution from non-telecommunication sectors such as media, security, and e-commerce is at a significant level. There is an analysis that stock price increases are expected due to the revaluation of equity value and business value in the future.

Park Jung-ho, President of SK Telecom [Photo by Yonhap News]

On the 2nd, Kiwoom Securities emphasized the need to pay attention to SK Telecom's non-telecommunication sectors. Despite favorable 5G subscriber growth in the core telecommunications business, growth expectations are not high due to policy risks, and the non-telecommunication sectors such as media, security, and e-commerce are analyzed as another growth engine driving performance growth.

In fact, as of the third quarter, wireless sector sales recorded 2.497 trillion KRW, the same level as the same period last year. Meanwhile, the media business recorded sales of 966.8 billion KRW and operating profit of 65.9 billion KRW, increasing by 20.3% and 78.8% respectively compared to the same period last year. The commerce business also recorded sales of 206.6 billion KRW, up 18.7% compared to the third quarter of last year. Security business sales increased by 15.5% year-on-year to 353.3 billion KRW. Jang Minjun, a researcher at Kiwoom Securities, explained, "Considering that SK Telecom's total operating profit increased by 20% year-on-year to 361.5 billion KRW, the operating profit contribution from media, security, and e-commerce is at a high level."

Equity value is also expected to be revalued through initial public offerings (IPOs) of major subsidiaries. Starting with One Store next year, the possibility of IPOs for major subsidiaries is increasing. One Store has recorded sales growth for the past nine quarters as of the third quarter and is rapidly increasing its market share. Researcher Jang said, "The increase in market share and profitability in the e-commerce market due to the partnership between 11st and Amazon, continued performance growth of media subsidiaries, and growth in paid subscribers of the online video service (OTT) platform create a favorable environment for IPOs," adding, "Through this, there is a considerable possibility of stock price increase due to the revaluation of related equity value and business value."

Attention should also be paid to dividends. Kiwoom Securities forecast that SK Telecom will achieve sales of 19.166 trillion KRW and operating profit of 1.384 trillion KRW next year. This is an increase of 3.8% and 7.8%, respectively, compared to this year's estimates. While both telecommunication and non-telecommunication sectors grow together, the dividend policy linked to the performance of equity investment companies and subsidiaries is also positive. Researcher Jang analyzed, "It is expected that the interim dividend level of 2021 will be maintained or increased, and the annual dividend per share level will be raised," adding, "This is because through the recent earnings announcement, a continuous expression of willingness to establish a shareholder return policy linked to performance was confirmed."

Based on these backgrounds, Kiwoom Securities maintained a 'Buy' investment opinion and a target stock price of 360,000 KRW for SK Telecom. The closing price on the previous day was 236,500 KRW.