Stock Bargain Sale at Jojeongjang... SK Square Rises Over 6%

SKT to Maintain Pre-Split Dividends Until Next Year
SK Square's Subsidiary IPO Boosts Net Asset Value

[Asia Economy Reporter Minyoung Cha] SK Telecom and SK Square, whose stock prices had sharply declined due to a correction phase, are showing price increases of around 1% and 6% respectively just before the market closed on the 2nd. The securities industry analyzes that despite the sharp drop in stock prices, the combined market capitalization after the split remains at about 22 trillion won, indicating strong potential for further gains.

As of 3:10 PM on the 2nd, SK Square was trading at 66,800 won, up 6.54% from the previous close. At the same time, SK Telecom was trading at 55,500 won, up 1.65% from the previous close. Earlier, on the 29th of last month, SK Square's stock price hit the upper limit at 85,000 won during intraday trading on its first day after relisting.

According to the securities industry, the combined market capitalization of SK Telecom and SK Square remains at 22 trillion won before the split (approximately 12 trillion won for SK Telecom and 10 trillion won for SK Square). When the listing was changed and relisted on the 29th of last month, the combined market capitalization started at 24 trillion won, about 10% higher.

On this day, SK Square and SK Telecom stock prices rebounded by about 8% and 1%, respectively. In a report, Hong-sik Kim, a researcher at Hana Financial Investment, stated, "A rebound in SK Telecom's stock price is expected," explaining that "profits are expected to grow based on high average revenue per user (ARPU) growth in mobile phone subscribers and depreciation expense stabilization next year, and the total dividend before the split is expected to be maintained at least until next year."

Researcher Kim predicted that SK Telecom's total dividends would remain at around 700 billion won for the time being, forecasting a rise in stock price.

Dividends have a significant impact on determining SK Telecom's market capitalization. After the split, the total dividends and dividend trends are likely to shape the stock price. Dividend trends can also affect market capitalization. If dividends are reduced, dividend yields tend to be high; conversely, if dividends are maintained, expected dividend yields may be lower.

Regarding this, Researcher Kim diagnosed, "After the split, SK Telecom's management seems to emphasize maintaining dividends," adding, "This is partly due to awareness of possible future corporate governance restructuring, and because stock prices greatly influence management evaluations."

SK Telecom's dividend yield in 2020 (the ratio of total dividends to total market capitalization) was recorded at 4.1%. The industry expects SK Telecom to maintain the existing total dividend amount of around 700 billion won after the split and to pay dividends quarterly, which could result in a dividend yield exceeding 6% (considering the decrease in SK Telecom's market capitalization after the split). This is a high dividend yield among companies listed on the KOSPI.

Jaemin Ahn, a researcher at NH Investment & Securities, estimated SK Telecom's corporate value at 16.9 trillion won and SK Square's at 12 trillion won, analyzing that the combined market capitalization of the two companies after the split will increase by more than 30% compared to before the split.

First, SK Telecom's high dividend is attractive. SK Telecom's dividend yield in 2020 was 4.1%. Since the existing total dividend amount (about 700 billion won) will be maintained and dividends will be paid quarterly after the split, it is expected to record a yield above 6%.

This is the highest dividend yield among companies listed on the KOSPI. Currently, SK Telecom's market capitalization is 12 trillion won. Considering that there are no companies with a market capitalization exceeding 5 trillion won among those with high dividend yields on the KOSPI, the industry explains that there is sufficient reason to invest in SK Telecom based solely on dividend payments.