Daishin Securities on the 28th said SK Square continues to offer alternative investment appeal to SK hynix. It maintained a "Buy" rating and raised the target price by 32% to 1 million won. SK Square's previous day closing price was 789,000 won.
The day before, SK Square's market capitalization topped 100 trillion won for the first time ever. It is the fifth among corporations with market capitalization over 100 trillion won. The company has a total of 84 employees, with market cap per person reaching 1.2 trillion won. While SK hynix shares rose 5.7% the previous day, SK Square gained 8.8%.
Given the share price outlook for SK hynix, analysts said there is ample upside potential for SK Square, which holds equity in it.
Kim Hoe-jae, an analyst at Daishin Securities, said, "Under Article 8 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act, a 10% single-stock inclusion limit applies to equity funds," and noted, "It has been applied to SK hynix since Oct. last year."
Accordingly, the Korea Financial Investment Association adjusts the market cap weighting of SK hynix included in equity funds once a month, but SK hynix's surge has created a gap between the weighting suggested by the association and the actual market cap. The market cap weighting announced on the 1st reflects the March average at 14.7%, but as of the previous day SK hynix's market cap weighting reached 17.5%.
Kim explained, "While the share price continues to jump on upward revisions to SK hynix's earnings outlook, SK Square's alternative investment appeal is ongoing."
Kim also said the value of SK hynix equity held by SK Square is rising, so a narrowing of the discount to net asset value (NAV) is expected.
Kim said, "At 2.3 times 12-month forward price-to-book ratio (PBR), SK hynix is at a historical peak," adding, "SK Square's discount to NAV should also narrow further." Accordingly, the target price applies a 30% discount to NAV.
Kim also analyzed that this year's shareholder returns are expected to include a first cash dividend that is tax-exempt of 200 billion won and 110 billion won in share buybacks. Dividend income from SK hynix this year, including a special dividend, is expected to be 710 billion won based on the consensus (the securities industry's average forecast). Accordingly, the company has disclosed shareholder returns of 310 billion won, considering 30% of dividend income and part of investment performance.