Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<div class="content-highlight">
<p>In this insight, we provide an updated NAV valuation analysis of <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Inc (034730 KS)</a>. Our updated base case valuation of SK Inc is 381,838 won per share, representing 45.5% higher than current share price.</p>
<p>In the next 12 months, we believe there is likely to be a greater emphasis on three of the unlisted companies of SK Inc including<strong> SK E&amp;S, SK Pharmteco, and SK Siltron</strong> which will increasingly be considered as potential IPO candidates.</p>
</div><ul>
<li>
<strong>SK E&amp;S</strong> is a private company that is 90% owned by <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Inc (034730 KS)</a>. In early September, SK E&amp;S provided a detailed plan to aggressively expand its hydrogen, LNG, and renewable operations by 2025.</li>
<li>
<a href="https://www.ezyeconomy.com/news/articleView.html?idxno=111825" target="_blank" rel="noopener">SK Pharmteco's</a> sales increased form 110 billion won in 2017 to 710 billion won in 2020. As of July 2021, the local media mentioned that the value of SK Pharmteco could be nearly 2 trillion won but this valuation could rise to nearly 10 trillion in two to three years if the company continues to make strong progress in the CMO sector.</li>
<li>
<a href="https://www.businesspost.co.kr/BP?command=article_view&amp;num=251332" target="_blank" rel="noopener"><strong>SK Siltron</strong></a> is another private company owned SK Inc that is seriously being considered for an IPO. In September 2021, the local media mentioned that SK Siltron could be valued at about 4 to 5 trillion won. </li>
</ul>


In this insight, we provide an updated NAV valuation analysis of SK Inc (034730 KS). Our updated base case valuation of SK Inc is 381,838 won per share, representing 45.5% higher than current share price.
In the next 12 months, we believe there is likely to be a greater emphasis on three of the unlisted companies of SK Inc including SK E&amp;S, SK Pharmteco, and SK Siltron which will increasingly be considered as potential IPO candidates.


SK E&amp;S is a private company that is 90% owned by SK Inc (034730 KS). In early September, SK E&amp;S provided a detailed plan to aggressively expand its hydrogen, LNG, and renewable operations by 2025.

SK Pharmteco's sales increased form 110 billion won in 2017 to 710 billion won in 2020. As of July 2021, the local media mentioned that the value of SK Pharmteco could be nearly 2 trillion won but this valuation could rise to nearly 10 trillion in two to three years if the company continues to make strong progress in the CMO sector.

SK Siltron is another private company owned SK Inc that is seriously being considered for an IPO. In September 2021, the local media mentioned that SK Siltron could be valued at about 4 to 5 trillion won. 


SK Inc - SoTP Valuation Analysis and 3 Key Catalysts (SK E&S, SK Pharmteco, & SK Siltron)

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<p>SKC is up close to 8% this morning. Today's share price rise is believed to be due to the ambitious plan to transform itself into a mobility material business by investing ₩5T by 2025. Through this, SKC plans to achieve a market cap of ₩30T by 2025.</p><p>Specifically, SKC announced plans to start various secondary battery material businesses, such as silicon anode materials and high nickel cathode materials, in addition to the expansion of its copper foil business.</p><div class="content-highlight"><p><strong>SKC has set a goal to increase the mobility material unit EBITDA from the current ₩380B to ₩2.5T by 2025, accounting for 80% of the total EBITDA.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/008/original/1.png?1632706939" class="editor-image img-responsive" data-smartkarma-image-id="232008"></figure></section><div class="content-caption">(Source: SKC)</div><p>There seems to be no disagreement as to the fact that these are new businesses that are essential for SKC's growth.</p><div class="content-highlight"><p><strong>However, what the market is really interested in is how SKC will raise this ₩5T.</strong></p></div><p>What SKC says on the surface is that it plans to secure it through strategic financing with financial partners, internal cash and asset optimization, etc. Well, isn't this wording too vague?</p><p>However, SKC presented three fairly specific guidelines along with such vague wording.</p><ol>
<li><strong>Debt ratio: 150~200%</strong></li>
<li><strong>Net Debt-to-EBITDA ratio: less than 4x</strong></li>
<li><strong>Protection of stakeholder interests (well, I do not fully understand what this means.)</strong></li>
</ol><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/009/original/2.png?1632707692" class="editor-image img-responsive" data-smartkarma-image-id="232009"></figure></section><div class="content-caption">(Source: SKC)</div><p>First, the current level meets the guideline of less than 200%. As of the first half of this year, SKC's debt-to-equity ratio was 182%. It is worse than the 130% debt ratio maintained before 2019, but considering the current cash flow level, it is difficult to see it as dangerous.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/010/original/3.png?1632708315" class="editor-image img-responsive" data-smartkarma-image-id="232010"></figure></section><div class="content-caption">(Source: FnGuide)</div><p>ND/EBITDA stood at 5.6x at the end of last year. However, by the end of this year, this ratio is expected to drop to less than 4x. It is because SKC's EBITDA is growing at a reasonably rapid pace. EBITDA increased from ₩300B in 2017 to ₩380B last year and is expected to reach more than ₩600B this year.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Consolidated"}'>Consolidated</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":43070}' data-sheets-numberformat='{"1":5,"2":"yyyy/m","3":1}'>2017</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":43435}' data-sheets-numberformat='{"1":5,"2":"yyyy/m","3":1}'>2018</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":43800}' data-sheets-numberformat='{"1":5,"2":"yyyy/m","3":1}'>2019</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44166}' data-sheets-numberformat='{"1":5,"2":"yyyy/m","3":1}'>2020</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44348}' data-sheets-numberformat='{"1":5,"2":"yyyy/mm","3":1}'>2021E (annualized based on 1H21)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net-debt"}'>Net-debt</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1238.4}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩1,238.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1295.3}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩1,295.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1595.6}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩1,595.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2149.7}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩2,149.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2410.1}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩2,410.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EBITDA"}'>EBITDA</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":298.1}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩298.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":328}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩328.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":283.1}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩283.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":386.6}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩386.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":638.8}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'>₩638.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ND/EBITDA"}'><strong>ND/EBITDA</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.154310634015431}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>4.15x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3.949085365853658}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>3.95x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.63617096432356}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>5.64x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.560527677185721}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>5.56x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3.772855353788353}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>3.77x</strong></td>
</tr>
<tr><td colspan="6" rowspan="1" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'>Source: FnGuide</td></tr>
</tbody>
</table>

SKC is up close to 8% this morning. Today's share price rise is believed to be due to the ambitious plan to transform itself into a mobility material business by investing ₩5T by 2025. Through this, SKC plans to achieve a market cap of ₩30T by 2025.Specifically, SKC announced plans to start various secondary battery material businesses, such as silicon anode materials and high nickel cathode materials, in addition to the expansion of its copper foil business.SKC has set a goal to increase the mobility material unit EBITDA from the current ₩380B to ₩2.5T by 2025, accounting for 80% of the total EBITDA.(Source: SKC)There seems to be no disagreement as to the fact that these are new businesses that are essential for SKC's growth.However, what the market is really interested in is how SKC will raise this ₩5T.What SKC says on the surface is that it plans to secure it through strategic financing with financial partners, internal cash and asset optimization, etc. Well, isn't this wording too vague?However, SKC presented three fairly specific guidelines along with such vague wording.
Debt ratio: 150~200%
Net Debt-to-EBITDA ratio: less than 4x
Protection of stakeholder interests (well, I do not fully understand what this means.)
(Source: SKC)First, the current level meets the guideline of less than 200%. As of the first half of this year, SKC's debt-to-equity ratio was 182%. It is worse than the 130% debt ratio maintained before 2019, but considering the current cash flow level, it is difficult to see it as dangerous.(Source: FnGuide)ND/EBITDA stood at 5.6x at the end of last year. However, by the end of this year, this ratio is expected to drop to less than 4x. It is because SKC's EBITDA is growing at a reasonably rapid pace. EBITDA increased from ₩300B in 2017 to ₩380B last year and is expected to reach more than ₩600B this year.










Consolidated
2017
2018
2019
2020
2021E (annualized based on 1H21)


Net-debt
₩1,238.4B
₩1,295.3B
₩1,595.6B
₩2,149.7B
₩2,410.1B


EBITDA
₩298.1B
₩328.0B
₩283.1B
₩386.6B
₩638.8B


ND/EBITDA
4.15x
3.95x
5.64x
5.56x
3.77x

Source: FnGuide



SKC Is up 8% Today on a ₩30T Target Value by 2025, but How to Raise a ₩5T Investment?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The KRX has announced the results of the September review of the BBIG indices and the changes will become effective after the close of trading on 9 September.</p><p>These are the changes to the indices:</p><ul style="list-style-type: disc;">
<li>Secondary Battery ETF: <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> replaces <a href="https://www.smartkarma.com/entities/chunbo-co-ltd" target="_blank" data-smartkarma-citation="entities:27848:1" rel="noopener">Chunbo Co Ltd (278280 KS)</a>
</li>
<li>Bio ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> and <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a> join the index, replacing <a href="https://www.smartkarma.com/entities/shinpoong-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:7296:1" rel="noopener">Shinpoong Pharmaceutical (019170 KS)</a> and <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a>. Additionally, <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> replaces <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> in the top 3 stocks.</li>
<li>Internet ETF: <a href="https://www.smartkarma.com/entities/kg-inicis-co-ltd" target="_blank" data-smartkarma-citation="entities:5234:1" rel="noopener">KG Inicis Co Ltd (035600 KS)</a> replaces <a href="https://www.smartkarma.com/entities/rsupport-co-ltd" target="_blank" data-smartkarma-citation="entities:14783:1" rel="noopener">Rsupport Co Ltd (131370 KS)</a> </li>
<li>Game ETF: <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> and <a href="https://www.smartkarma.com/entities/devsisters-co-ltd" target="_blank" data-smartkarma-citation="entities:14096:1" rel="noopener">Devsisters (194480 KS)</a> replace <a href="https://www.smartkarma.com/entities/wemade-co-ltd" target="_blank" data-smartkarma-citation="entities:9940:1" rel="noopener">Wemade Co., Ltd. (112040 KS)</a> and <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a>
</li>
<li>BBIG ETF: <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> replace <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>.</li>
</ul><p>KRX has broken its own rules (everyone does it, so join in!) by including <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> even though the stock listed post the July-end cut off and there is no provision of Fast Entry in the index methodology.</p><p>Stocks with the largest inflows are <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a>, <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a> and <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a> while the stocks with the largest outflows are <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a>, <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>, <a href="https://www.smartkarma.com/entities/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical Co Ltd (003670 KS)</a>, <a href="https://www.smartkarma.com/entities/skc-co-ltd" target="_blank" data-smartkarma-citation="entities:3970:1" rel="noopener">SKC Co Ltd (011790 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a>.</p><p><a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> is also a Fast Entry to the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> and there will be passive buying from those trackers as well.</p>

The KRX has announced the results of the September review of the BBIG indices and the changes will become effective after the close of trading on 9 September.These are the changes to the indices:
Secondary Battery ETF: SK IE Technology (361610 KS) replaces Chunbo Co Ltd (278280 KS)

Bio ETF: SK Bioscience (302440 KS) and Hanmi Pharm (128940 KS) join the index, replacing Shinpoong Pharmaceutical (019170 KS) and Seegene Inc (096530 KS). Additionally, SK Bioscience (302440 KS) replaces SK Biopharmaceuticals Co Ltd (326030 KS) in the top 3 stocks.
Internet ETF: KG Inicis Co Ltd (035600 KS) replaces Rsupport Co Ltd (131370 KS) 
Game ETF:  Krafton Inc (259960 KS) and Devsisters (194480 KS) replace Wemade Co., Ltd. (112040 KS) and Neptune Company (217270 KS)

BBIG ETF: SK Bioscience (302440 KS) and  Krafton Inc (259960 KS) replace SK Biopharmaceuticals Co Ltd (326030 KS) and Kakao Games Corp (293490 KS).
KRX has broken its own rules (everyone does it, so join in!) by including  Krafton Inc (259960 KS) even though the stock listed post the July-end cut off and there is no provision of Fast Entry in the index methodology.Stocks with the largest inflows are SK Bioscience (302440 KS),  Krafton Inc (259960 KS), SK IE Technology (361610 KS), LG Chem Ltd (051910 KS), SK Innovation (096770 KS) and Douzone Bizon (012510 KS) while the stocks with the largest outflows are Kakao Games Corp (293490 KS), SK Biopharmaceuticals Co Ltd (326030 KS), Kakao Corp (035720 KS), Posco Chemical Co Ltd (003670 KS), SKC Co Ltd (011790 KS) and Samsung SDI (006400 KS). Krafton Inc (259960 KS) is also a Fast Entry to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and there will be passive buying from those trackers as well.

KRX BBIG Index Rebalance: Krafton, SK Bioscience, SK IE Tech Included (Among Others)

<h2>Change the articles of incorporation for stock dividends</h2><p>SK Innovation will hold an extraordinary general meeting of shareholders on September 16. The most important agenda for this general shareholders' meeting is to get shareholder approval for SK Innovation's spin-off announced on the 4th of this month.</p><div class="content-highlight">
<p><strong>But other things stand out as well.</strong></p>
<p><strong>That is, SK innovation is partially amending its articles of incorporation. And it wants to obtain shareholder approval for these amendments at this general meeting.</strong></p>
</div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/226/948/original/Screen+Shot+2021-08-30+at+5.39.42+PM.png?1630359625" class="editor-image img-responsive" data-smartkarma-image-id="226948"></figure></section><p>Among the amendments, the amendment to allow for stock dividends is attracting attention from the market. It is unusual for a Korean local company to insert a stock dividend clause (in addition to a cash dividend) in the articles of incorporation. In fact, a stock dividend itself is unfamiliar in Korea.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/226/949/original/Screen+Shot+2021-08-30+at+5.26.21+PM.png?1630360013" class="editor-image img-responsive" data-smartkarma-image-id="226949"></figure><p>Then, on the surface, it is interpreted that SK Innovation chose a stock dividend to reduce the backlash from shareholders following the spin-off because SK Innovation lacked cash and transferred most of its cash holdings to a new battery company.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/226/950/original/Screen+Shot+2021-08-30+at+5.53.24+PM.png?1630360549" class="editor-image img-responsive" data-smartkarma-image-id="226950"></figure></section></section>

Change the articles of incorporation for stock dividendsSK Innovation will hold an extraordinary general meeting of shareholders on September 16. The most important agenda for this general shareholders' meeting is to get shareholder approval for SK Innovation's spin-off announced on the 4th of this month.
But other things stand out as well.
That is, SK innovation is partially amending its articles of incorporation. And it wants to obtain shareholder approval for these amendments at this general meeting.
Among the amendments, the amendment to allow for stock dividends is attracting attention from the market. It is unusual for a Korean local company to insert a stock dividend clause (in addition to a cash dividend) in the articles of incorporation. In fact, a stock dividend itself is unfamiliar in Korea.Then, on the surface, it is interpreted that SK Innovation chose a stock dividend to reduce the backlash from shareholders following the spin-off because SK Innovation lacked cash and transferred most of its cash holdings to a new battery company.


SK Innovation's Unusual Attempt to Change the Articles of Incorporation for Stock Dividends

<p>A fairly interesting path to the growth strategy of SK Group, with SK Holdings at the center, spread in the local market this morning. The core of this strategic path is to maximize valuation by separating the business divisions owned by SK Holdings' direct subsidiaries and listing them separately.</p><p>This is a part of the so-called SK Financial Story strategy that SK Holdings recently unveiled extensively. Through this, SK Holdings plans to increase its valuation nearly tenfold by 2025.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/226/830/original/5.png?1630290296" class="editor-image img-responsive" data-smartkarma-image-id="226830"></figure></section><div class="content-caption">(Courtesy SK Holdings)</div><div class="content-highlight"><p><em>The full version of this SK Financial Story presentation is attached below in this insight.</em></p></div><p>This strategic path was made clear by the merger of SK Holdings and SK Materials. Therefore, the SK Holdings/SK Materials merger is just the beginning, and that a similar merger will continue is spreading in the local market today.</p><p><strong>So who will be the next target?</strong></p><p>The answer to this? Well, we can find the answer from today's stock prices. Among SK affiliates, <a href="https://www.smartkarma.com/entities/skc-co-ltd" target="_blank" data-smartkarma-citation="entities:3970:1" rel="noopener">SKC Co Ltd (011790 KS)</a> is showing the largest share price movement. As of now (11:30 am local time), SKC is down more than 5%. This is because concerns are rapidly growing in the market that SKC will become the next affiliate to merge with SK Holdings.</p><ul>
<li><strong>SKC will pursue a physical division in the same way as SK Materials, and a newly created operating company will be listed separately, aiming for a significant valuation re-rating.</strong></li>
<li><strong>After SKC, SK Siltron, an unlisted company, will be the next target. This is a scenario where SK Siltron merges with SK Materials' newly created operating company and goes public. Similarly, this newly combined company will again aim for a substantial valuation re-rating. </strong></li>
</ul>

A fairly interesting path to the growth strategy of SK Group, with SK Holdings at the center, spread in the local market this morning. The core of this strategic path is to maximize valuation by separating the business divisions owned by SK Holdings' direct subsidiaries and listing them separately.This is a part of the so-called SK Financial Story strategy that SK Holdings recently unveiled extensively. Through this, SK Holdings plans to increase its valuation nearly tenfold by 2025.(Courtesy SK Holdings)The full version of this SK Financial Story presentation is attached below in this insight.This strategic path was made clear by the merger of SK Holdings and SK Materials. Therefore, the SK Holdings/SK Materials merger is just the beginning, and that a similar merger will continue is spreading in the local market today.So who will be the next target?The answer to this? Well, we can find the answer from today's stock prices. Among SK affiliates, SKC Co Ltd (011790 KS) is showing the largest share price movement. As of now (11:30 am local time), SKC is down more than 5%. This is because concerns are rapidly growing in the market that SKC will become the next affiliate to merge with SK Holdings.
SKC will pursue a physical division in the same way as SK Materials, and a newly created operating company will be listed separately, aiming for a significant valuation re-rating.
After SKC, SK Siltron, an unlisted company, will be the next target. This is a scenario where SK Siltron merges with SK Materials' newly created operating company and goes public. Similarly, this newly combined company will again aim for a substantial valuation re-rating. 


SKC Is Down 5% Today: Why & What Impact on SK Holdings/SK Materials Arb Spread-Hunting

South Korea

SKC Co., Ltd. manufactures a variety of films, including polyester films, silicon coated films, and inkjet films.  The Company also produces chemical products, such as propylene oxide, propylene glycol, and styrene monomer. In addition, SKC provides materials for photovoltaic.

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SKC Co Ltd (011790 KS)

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