SK Square Rides Upturn—Lowers NAV Discount Target to 30% by 2028 from 50% by 2027

(Seoul=Yonhap Infomax) Hak Seong Kim =

SK Square Co., the intermediate holding company for SK Group’s semiconductor and ICT businesses, has unveiled a more aggressive plan to enhance corporate value just one year after its initial disclosure.

Buoyed by a more than 250% surge in its share price this year, SK Square has sharply reduced its net asset value (NAV) discount rate and set a bolder target.

In its corporate value enhancement plan announced on the 24th, SK Square revised its NAV discount rate target from “below 50% by 2027” to “below 30% by 2028.” As of the end of Q3 this year, SK Square’s NAV discount rate stood at 52.9%. With the 2027 target now within reach, the company has set a more ambitious goal.

SK Square’s NAV discount rate improved from 73% in 2023 to 66% last year, with a further significant reduction this year. The company’s discount rate is now lower than the average of domestic peers such as Samsung C&T Corp., POSCO Holdings Inc., LG Corp., and Lotte Corporation.

A high NAV discount rate indicates that the market is undervaluing the company’s share price relative to its net asset value. By setting a lower NAV discount target, SK Square is promising shareholders a faster resolution of its undervaluation.

Additionally, SK Square maintained its targets of sustaining a return on equity (ROE) above its cost of equity (COE) and keeping its price-to-book ratio (PBR) at or above 1x. As of the end of Q3 this year (last 12 months), SK Square’s ROE was 33.7% and its PBR was 1.1x.

SK Square attributed its performance this year to strong results from its core subsidiary SK hynix Inc., a leading memory chipmaker, improved profitability in its ICT portfolio through operational enhancements, and ongoing shareholder return initiatives.

Driven by a boom in memory chips fueled by increased artificial intelligence (AI) investment, SK hynix shares have surged 200% this year, while SK Square’s stock has climbed more than 250%.

In its value-up plan announced in November last year, SK Square set a goal to reduce its NAV discount rate, linked executive compensation to this metric, and committed to management practices focused on capital cost awareness. The plan received positive feedback from the market, including from UK hedge fund Pelham Capital.

Meanwhile, on the 13th, SK Square announced an additional 100 billion won ($76 million) share buyback and the cancellation of 77.9 billion won ($59 million) worth of treasury shares. The company also plans to appoint an additional outside director to strengthen the expertise and independence of its board.

hskim@yna.co.kr

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