Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Private Capital Markets

<div class="content-highlight">According to <a href="https://www.bloomberg.com/news/articles/2021-01-06/softbank-s-son-is-poised-for-another-ipo-windfall-in-2021" target="_blank" rel="noopener">Bloomberg, </a>it reported that Coupang, the largest e-commerce company in Korea, is getting ready to complete its IPO as soon as 2Q 2021. The estimated valuation of Coupang could be at least $30 billion. Softbank invested $2.7 billion in Coupang and <a href="https://biz.chosun.com/site/data/html_dir/2021/01/07/2021010702121.html?utm_source=naver&amp;utm_medium=original&amp;utm_campaign=biz" target="_blank" rel="noopener">Softbank (Vision Fund)</a> currently has a 37% stake in the company. If Mr. Market is willing to place a $30 billion valuation on Coupang, Softbank would reap a cool $8 billion+ gain on its investments in Coupang.</div>

According to Bloomberg, it reported that Coupang, the largest e-commerce company in Korea, is getting ready to complete its IPO as soon as 2Q 2021. The estimated valuation of Coupang could be at least $30 billion. Softbank invested $2.7 billion in Coupang and Softbank (Vision Fund) currently has a 37% stake in the company. If Mr. Market is willing to place a $30 billion valuation on Coupang, Softbank would reap a cool $8 billion+ gain on its investments in Coupang.

Initial Thoughts on the Coupang IPO & Impact on SK Telecom (11st) Vs. Naver

Event-Driven

<div class="content-highlight">On December 3rd, the SK Group announced that SK Telecom's current <a href="http://koreabizwire.com/sk-telecom-ceo-to-double-as-sk-hynix-vice-chairman/176008" target="_blank" rel="noopener">CEO Park Jung-Ho</a> will be promoted to be the Vice Chairman of <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS) </a>while also maintaining his current position as the CEO of SK Telecom. This is a bit unusual. The CEO of position of SK Telecom is difficult on its own. Why would the SK Group try to tact on another senior position of the Vice Chairman position of SK Hynix on the SK Telecom CEO Park Jung-Ho? In our view, this is a PRELUDE to SK Telecom becoming an INTERMEDIATE HOLDCO of the SK Group. </div>

On December 3rd, the SK Group announced that SK Telecom's current CEO Park Jung-Ho will be promoted to be the Vice Chairman of SK Hynix (000660 KS) while also maintaining his current position as the CEO of SK Telecom. This is a bit unusual. The CEO of position of SK Telecom is difficult on its own. Why would the SK Group try to tact on another senior position of the Vice Chairman position of SK Hynix on the SK Telecom CEO Park Jung-Ho? In our view, this is a PRELUDE to SK Telecom becoming an INTERMEDIATE HOLDCO of the SK Group. 

SK Telecom's CEO Park Jung-Ho Becomes Vice Chairman of SK Hynix: Prelude to an Intermediate Holdco?

It was <a href="https://finance.naver.com/news/news_read.nhn?article_id=0004449439&amp;office_id=015&amp;mode=LSS2D&amp;type=0&amp;section_id=101&amp;section_id2=258&amp;section_id3=&amp;date=20201113&amp;page=1" target="_blank" rel="noopener">announced</a> after the market close today that <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> is close to completing a strategic partnership with <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a>'s 11st e-commerce business (SK Telecom has an 80.3% stake in 11st). This strategic partnership is likely to include both Amazon taking an investment stake in 11st (potentially) as well as other business partnerships.However, the exact investment amount has not yet been announced. However, the local <a href="https://www.sedaily.com/NewsView/1ZAE5G9L9S" target="_blank" rel="noopener">media</a> have mentioned that the investment amount could total about 50 billion won to 300 billion won. One of the key benefits of a strategic partnership between SK Telecom's 11st and Amazon is that it could accelerate the IPO of 11st. We believe a potential strategic partnership between SK Telecom and Amazon would be positive for SK Telecom. On a relative basis, SK Telecom probably has a lot more to gain from this partnership rather than Amazon.

It was announced after the market close today that Amazon.com Inc (AMZN US) is close to completing a strategic partnership with SK Telecom (017670 KS)'s 11st e-commerce business (SK Telecom has an 80.3% stake in 11st). This strategic partnership is likely to include both Amazon taking an investment stake in 11st (potentially) as well as other business partnerships.However, the exact investment amount has not yet been announced. However, the local media have mentioned that the investment amount could total about 50 billion won to 300 billion won. One of the key benefits of a strategic partnership between SK Telecom's 11st and Amazon is that it could accelerate the IPO of 11st. We believe a potential strategic partnership between SK Telecom and Amazon would be positive for SK Telecom. On a relative basis, SK Telecom probably has a lot more to gain from this partnership rather than Amazon.

Amazon and SK Telecom's 11st Close to Forming a Strategic Partnership

Equity Bottom-Up

<div class="content-highlight">
SK Telecom reported solid results in 3Q 2020. The company generated revenue of 4.7 trillion won (up 3.7% YoY and 0.8% higher than consensus), operating profit of 361.5 billion won (up 19.7% YoY and same as consensus), and net profit of 395.7 billion won (up 44.4% YoY and 5.6% lower than the consensus). We remain positive on SK Telecom.
SK Telecom paid dividends per share of 10,000 won this year. At the current price of 223,000 won, this represents a dividend yield of 4.5%. There has been some ongoing discussions about linking the dividends of its major affiliates including SK Hynix (20.7% owned by SK Telecom). However, it appears that this is not likely to occur as the new requirement for new holding companies' ownership of subsidiaries is expected to increase from 20% to 30%.
</div>We like SK Telecom's shares right now and believe they are undervalued. We think there are three key catalysts on this stock over the next one year which are as follows:1) Solid expansion of 5G Services - At the end of September, the company had 4.3 million 5G subscribers and this number is likely to nearly double by the end of 2021.2) IPO of key subsidiaries - SK Telecom plans to first complete the IPO of its subsidiary OneStore in 2H 2021 and other key promising subsidiaries including 11st, SK Broadband, Wavve, and SK Broadband over the next 2-3 years.3) Completion of divorce between Chairman Chey and his wife - The divorce proceedings between Chairman Chey and his wife has been ongoing for more than 10 months. Chey's wife Roh is seeking a 42% stake in SK Holdings. A completion of this divorce proceedings could be a key catalyst that accelerates the reorganization of the entire SK Group, including SK Telecom and SK Holdings.


SK Telecom reported solid results in 3Q 2020. The company generated revenue of 4.7 trillion won (up 3.7% YoY and 0.8% higher than consensus), operating profit of 361.5 billion won (up 19.7% YoY and same as consensus), and net profit of 395.7 billion won (up 44.4% YoY and 5.6% lower than the consensus). We remain positive on SK Telecom.
SK Telecom paid dividends per share of 10,000 won this year. At the current price of 223,000 won, this represents a dividend yield of 4.5%. There has been some ongoing discussions about linking the dividends of its major affiliates including SK Hynix (20.7% owned by SK Telecom). However, it appears that this is not likely to occur as the new requirement for new holding companies' ownership of subsidiaries is expected to increase from 20% to 30%.
We like SK Telecom's shares right now and believe they are undervalued. We think there are three key catalysts on this stock over the next one year which are as follows:1) Solid expansion of 5G Services - At the end of September, the company had 4.3 million 5G subscribers and this number is likely to nearly double by the end of 2021.2) IPO of key subsidiaries - SK Telecom plans to first complete the IPO of its subsidiary OneStore in 2H 2021 and other key promising subsidiaries including 11st, SK Broadband, Wavve, and SK Broadband over the next 2-3 years.3) Completion of divorce between Chairman Chey and his wife - The divorce proceedings between Chairman Chey and his wife has been ongoing for more than 10 months. Chey's wife Roh is seeking a 42% stake in SK Holdings. A completion of this divorce proceedings could be a key catalyst that accelerates the reorganization of the entire SK Group, including SK Telecom and SK Holdings. 

Major Highlights of SK Telecom's 3Q 2020 Earnings Conference Call

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

The Wall Street Journal today published a leak that Intel and SK hynix are in negotiations for SK hynix to acquire Intel's memory business.  This Smartkarma Insight analyzes such a sale to determine its feasibility.

The Wall Street Journal today published a leak that Intel and SK hynix are in negotiations for SK hynix to acquire Intel's memory business.  This Smartkarma Insight analyzes such a sale to determine its feasibility.

Intel's Memory Business Sale.  Does It Make Sense?

South Korea

SK Telecom Co., Ltd. is a Korean mobile and telecommunications operator. The Company provides cellular voice, wireless data, and wireless internet services. SK Telecom also offers fixed line services and platform services.

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SK Telecom (017670 KS)

Initial Thoughts on the Coupang IPO & Impact on SK Telecom (11st) Vs. Naver

According to Bloomberg, it reported that Coupang is getting ready to complete its IPO as soon as 2Q 2021. The estimated valuation of Coupang could...

Douglas Kim

SK Telecom's CEO Park Jung-Ho Becomes Vice Chairman of SK Hynix: Prelude to an Intermediate Holdco?

The fact that Park Jung-Ho will now be the CEO of SK Telecom and the Vice Chairman of SK Hynix at the same time would suggest a PRELUDE of SK...

Douglas Kim

Amazon and SK Telecom's 11st Close to Forming a Strategic Partnership

It was announced after the market close today that Amazon.com Inc (AMZN US) is close to completing a strategic partnership with SK Telecom (017670...

Douglas Kim

Major Highlights of SK Telecom's 3Q 2020 Earnings Conference Call

In this insight, we provide the major highlights of SK Telecom's 3Q 2020 earnings results. The company reported solid results in 3Q 2020, and its...

Douglas Kim

Intel's Memory Business Sale. Does It Make Sense?

The Wall Street journal today published a leak that Intel and SK hynix are in

Jim Handy

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