SKT Early Picked by Foreigners

Strong Earnings Outlook and Expectations for Corporate Governance Restructuring

Park Jung-ho, CEO of SK Telecom, is presenting management performance and vision to shareholders at the 37th Annual General Meeting held on the 25th of last month at the T Tower headquarters in Euljiro, Seoul.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Foreign investors are flocking to buy SK Telecom shares amid expectations of a corporate governance restructuring and solid earnings forecasts.

According to the Korea Exchange on the 14th, foreign investors have net purchased SK Telecom shares worth 196.9 billion KRW from the beginning of this month until the previous day. This ranks fourth among the top net purchased stocks by foreign investors during the same period. They have been buying continuously for 14 trading days since the 25th of last month. This buying trend has continued since the beginning of the year, with net purchases on all but 9 trading days.

This appears to reflect expectations of solid first-quarter earnings this year as well as benefits from SK Group's corporate governance restructuring. According to financial information provider FnGuide, the market consensus for SK Telecom's first-quarter earnings this year is sales of 4.7816 trillion KRW and operating profit of 347.7 billion KRW, representing increases of 7.44% and 15.13% respectively compared to the same period last year. Namgon Choi, a researcher at Yuanta Securities, explained, "The average revenue per user (ARPU) has increased, marketing competition has stabilized, and capital expenditure (CAPEX) has decreased. As the profitability of subsidiaries SK Broadband, 11st, and ADT Caps has also improved, the first-quarter earnings will definitely improve."

Expectations for corporate governance restructuring are also growing. After the market closes today, SK Telecom plans to directly explain the direction of the restructuring, including the establishment of an intermediate holding company, to its employees. Accordingly, SK Telecom is expected to be split into SKT Investment (intermediate holding company) and SKT Business (MNO) through a spin-off. The plan gaining traction is to place SK Hynix and Wave under SKT Investment, and some subsidiaries such as SK Broadband and SK Telink under SKT Business (MNO).

In particular, the stock price is rebounding on expectations that the intermediate holding company will not merge with the existing holding company SK. Concerns that a merger between the intermediate holding company and SK would benefit only major shareholders and be against the interests of SK Telecom shareholders have been dispelled. SK Telecom closed at 300,000 KRW, up 6.01% the previous day. This marks an increase of about 20.5% over roughly one month since the 24th of last month. The SK Telecom stock price surpassing 300,000 KRW is the first time since February 17, 2015.