[Click eStock] SK, Rising Expectations for Dividends and Hydrogen Business

Minimum Dividend of 6,500 Won Per Share Expected This Year
Future Growth Potential Centered on Hydrogen Economy

Choi Tae-won, Chairman of SK

[Asia Economy Reporter Minwoo Lee] SK is expected to maintain a solid foundation as an investment holding company. It is anticipated to continue high dividends this year, and its hydrogen-based new businesses are seen to have significant growth potential in the future.

On the 3rd, NH Investment & Securities analyzed SK in this way. First, it forecasted a high dividend of at least 6,500 KRW per share this year as well. With the listing of its subsidiary SK Biopharm, investment in logistics center company ESR followed by listing on the Hong Kong stock exchange (partial disposal of shares), and investment in data center company CDG followed by listing on the US Nasdaq, SK is evaluated to have entered a virtuous cycle as an investment holding company. Even excluding the interim dividend receipt of about 454.3 billion KRW from SK E&S, non-recurring dividend resources such as the gain from ESR sale of 490 billion KRW and SK Biopharm old stock sales (8%, 307 billion KRW) have already secured about 797 billion KRW. Despite the decrease in dividend income at the end of 2020 due to poor performance of SK E&S and SK Innovation, it is expected that dividend and new growth portfolio investment resources will be secured through deferred special profits in 2020, partial disposal of shares after SK Biopharm’s lock-up period, and the listing of SK Siltron.

Researcher Dongyang Kim of NH Investment & Securities explained, "The regular annual dividend per share is 5,000 KRW, and if the special dividend (30% of investment gains) is paid in full, it amounts to 4,500 KRW, or 1,500 KRW even if paid in three installments. This means the annual dividend this year will be at least 6,500 KRW."

The hydrogen economy business was also highlighted as a key area. SK E&S, a major source of dividend income, is expected to have limited performance improvement next year due to weak system marginal price (SMP) and LNG price weakness following the introduction of the Freeport LNG terminal in Texas, USA. Nevertheless, the disposal of shares in China Gas Holdings (inflow of 1.8141 trillion KRW or interim dividend payment of 504.8 billion KRW), commercial production of the 1.0 gigawatt (GW) Yeoju LNG power plant in 2022, and hydrogen production from 2023 onwards point to mid- to long-term growth prospects.

Researcher Kim said, "SK plans to promote hydrogen business centered on SK Innovation (by-product hydrogen, charging network) and SK E&S (direct LNG import), including hydrogen production, charging, and fuel cell power generation," adding, "By securing hydrogen production and supply infrastructure, it will grow as a main pillar of the hydrogen economy."

Against this backdrop, NH Investment & Securities maintained a 'Buy' investment opinion on SK with a target price of 350,000 KRW. The closing price the previous day was 237,000 KRW.