Mirae Asset Securities on the 11th said that talk of a pre-IPO and a potential U.S. listing for SK hynix(000660)'s U.S. NAND flash subsidiary Solidigm should be approached as a move to recover M&A investment funds and to secure follow-on investment resources. It maintained a Buy rating and a target price of 2.8 million won. SK hynix's closing price the previous day was 1.42 million won.
SK hynix on Jan. 28 this year committed to contribute up to $10 billion to SK hynix NAND Product Solutions, the parent of Solidigm and a subsidiary of SK hynix. SK Inc., SK Innovation and SK Telecom also contributed $1.1 billion.
Kim Young-geon, an analyst at Mirae Asset Securities, said, "If equity in Solidigm is sold to raise investment funds, it would secure capacity for about $15 billion in U.S. investment."
The impact of a partial withdrawal of equity in Solidigm on SK hynix's corporate value was expected to be limited.
Kim said, "SK hynix has built a track record not only in its core business but also in capital market strategy, including an equity investment in Kioxia in 2018 and partial recovery of proceeds, the acquisition of Intel's NAND business unit in 2020, and this year's largest-ever Nasdaq American depositary receipt (ADR) issuance," adding, "If global-level shareholder returns are added, the company's standing is expected to be further strengthened."
Mirae Asset Securities estimated SK hynix's shareholder returns at 40 trillion won. Kim said, "The official period for calculating the size of special shareholder returns runs through the end of 2027, the stock has fallen 51% from the recent peak, making this a timely moment for buybacks and other returns, and the larger the return, the more it will be taken as confidence in future cash-generation capacity."
SK hynix's free cash flow (FCF) this year was estimated to accumulate to 180 trillion won, with net cash reaching 173 trillion won.
Kim said, "Even if 100 trillion won in cash is retained as a safe asset, 70 trillion to 80 trillion won in available resources would remain, and returning half of that is fully feasible," adding, "Based on the current share price, the dividend yield is expected to be up to 3.9%."