NH Investment & Securities said SK Square(402340) is continuing active shareholder-return policies such as its own dividends and share buybacks, while also standing to benefit from SK hynix's dividend expansion. If SK hynix raises the dividend per share to 13,600 won, about 2 trillion won in dividend revenue could flow into SK Square and be used as funding for additional mergers and acquisitions (M&A).
On the 18th, Ahn Jae-min, an analyst at NH Investment & Securities, maintained a "buy" rating on SK Square in a report. However, reflecting SK hynix's recent share-price correction, the target price was cut 15.6% to 2.28 million won from 2.7 million won.
In June this year, SK Square paid a dividend of 1,500 won per share, totaling 204.3 billion won. Separately, it also plans to buy back 40 billion won of its own shares this year and 70 billion won next year.
It also said the expansion of SK hynix's shareholder returns will likely work positively for SK Square going forward. NH Investment & Securities projected SK hynix will unveil a strengthened shareholder-return policy with its third-quarter earnings release.
Ahn said, "If SK hynix's dividend per share is expanded to 13,600 won, SK Square will obtain about 2 trillion won in dividend revenue." Ahn added that with the funds secured this way, SK Square could actively pursue M&A targeting promising companies within the semiconductor value chain.
Although SK Square is also undergoing a pullback following the recent decline in SK hynix's share price, it maintained a positive view on the semiconductor cycle. While the market is voicing concerns that long-term agreements (LTA) could cap the rise in memory prices, NH Investment & Securities called those concerns excessive.
In particular, given the strong growth of neo-cloud players such as Nebius and CoreWeave, demand for investment in artificial intelligence (AI) infrastructure remains solid.
Ahn said, "Given the explosive growth of neo-cloud corporations such as Nebius and CoreWeave that recently reported earnings, demand for AI infrastructure remains solid."
It projected that once the shareholder-return policies of Samsung Electronics and SK hynix are disclosed, investor sentiment across the semiconductor sector will recover. In particular, since SK Square's share price moved more sharply than SK hynix's in the previous uptrend, its momentum could be stronger in a rebound phase as well.
However, the drop in SK hynix's share price weighed on the valuation of SK Square. NH Investment & Securities raised the net asset value (NAV) discount rate to 40% from 25%, considering SK hynix's overwhelming weight in SK Square's NAV, and accordingly lowered the target price to 2.28 million won.