[Click eStock] "SK Telecom, Earnings and Dividend Stock with No Valuation Burden"

DB Financial Investment Report

[Asia Economy Reporter Minji Lee] DB Financial Investment maintained a buy rating on SK Telecom on the 3rd and set a target price of 78,000 KRW. This is based on the expectation of stable earnings and dividends next year.

After the spin-off, SK Telecom was re-listed as a pure telecom company operating its core wireless and wired businesses. Although the spin-off removed the company's subsidiaries such as SK Shieldus and 11st, no significant changes in performance are expected. This is because the combined revenue of SK Telecom's standalone and SK Broadband accounts for 83%, and operating profit accounts for 93% compared to the pre-spin-off consolidated results.

Shin Eun-jung, a researcher at DB Financial Investment, said, "Accurate performance data will be revised and reflected along with forecasts after the Q4 earnings announcement," adding, "In the future, revenue diversification is also expected through new businesses such as the T Universe subscription service, metaverse, cloud, and IoT, in addition to the core wireless and wired businesses."

According to the mid-to-long-term dividend policy, it is expected that 30-40% on a standalone basis will be allocated as total dividends. It is anticipated that the dividend amount will at least maintain last year's level of 715 billion KRW even after the spin-off. The annual DPS for this year is estimated to be around 3,300 KRW. Even applying 35% to this year's expected EBITDA-CAPEX (capital expenditure) of 2 trillion KRW results in a DPS of 3,300 KRW and an annualized dividend yield of 5.9%. Excluding dividends for Q2 and Q3, the year-end dividend is expected to be around 1,600 KRW, which corresponds to a dividend yield of 2.9% based on the current stock price.

Researcher Shin Eun-jung explained, "The expected dividend yield is 5.9% this year and 6.5% in 2022, which is significantly higher than the pre-spin-off level of around 4%, which is positive," adding, "Even though Hynix's net profit contribution will disappear from 2022, there is no valuation burden with a PER (price-to-earnings ratio) of 10.8 times next year, and investors should pay attention to the company returning as a stable earnings and dividend stock."