Technology

Report by Aequitas Research

Sumeet Singh runs the rule over SK Telecom’s cybersecurity arm as it looks to raise US$860m in its upcoming Korea IPO - a key issue for Sumeet relates to the proportion of revenue that SKS derives from related parties. It has increased from 15.7% of revenue in 2019 to 25.5% by 2021 and accounted for 43.4% of growth in FY20 and 65.6% in FY21. In addition, he has previously flagged how SKS’s physical security and cybersecurity segments have been suffering from margin pressure for several years and the fact that the company is now heavily in debt. The stock is being offered at an expensive looking 8.2-9.3x FY23 EV/EBITDA, 2.4-2.7x FY22 EV/Sales and 44-55x FY22 P/E.

Communications

Report by New Street Research

Something is changing in the Korean Telco landscape - buybacks from SK Telecom and KT Corp, increased stock ownership by employees and management, an increased focus on profitability / returns, and more progressive dividend policies all point to a better environment for shareholders going forward. At the same time, post the spin out of SK Square, SKT, which has not historically been a rapid growth company, is now guiding to 50% revenue growth over the next 5 years! Taken together Korean Telcos which have historically traded at a substantial discount to the rest of the EM telecom sector look set to re-rate materially.