▲ SK Square
As the listing of SK Hynix's American Depositary Receipts (ADR) on the U.S. stock market approaches, expectations are rising that the corporate value of its largest shareholder, SK Square, could be re-evaluated.
Analysts suggest that if the U.S. listing leads to increased accessibility for global investors and a reduction in the so-called Korea Discount, the rise in SK Hynix's corporate value could have a positive impact on SK Square's net asset value (NAV) and stock price.
However, some remain cautious, noting that an ADR listing alone does not guarantee an increase in corporate value and that it must be supported by future earnings improvements and shareholder return policies.
According to the Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART) today (July 2), SK Hynix will list its ADRs on the Nasdaq market on July 10.
The issuance is valued at approximately 45.5 trillion won, representing about 2.5% of the total outstanding shares.
Currently, SK Square is the largest shareholder of SK Hynix, holding a 20.5% stake.
Because of this, fluctuations in the asset value of SK Hynix are directly linked to the corporate value of SK Square.
In the securities industry, there is optimism that this ADR listing will help alleviate the undervaluation SK Hynix has faced compared to its global memory chip peers.
Improved investment accessibility following the U.S. listing and the potential inflow of global passive funds are also cited as positive factors.
In fact, while SK Hynix has higher operating profits than Micron, its 12-month forward price-to-earnings ratio (PER) remains at around 6 times, whereas Micron's is around 11 times.
Consequently, if the company's corporate value is properly recognized in the U.S. market, there is a possibility that SK Square's asset value will rise accordingly.
Foreign ownership of SK Square is nearing 50%.
Ahn Jae-min, a researcher at NH Investment & Securities, assessed, "SK Square's corporate value is rising in tandem with the increase in SK Hynix's stock price," adding, "SK Square continues to review expansions into businesses that can create synergies with SK Hynix within the semiconductor value chain."
Although SK Square's stake in SK Hynix will slightly decrease to the 20% level once new shares are issued following the ADR listing, the company maintains that there will be no significant change in its control.
SK Hynix also stated in its registration statement filed with the U.S. Securities and Exchange Commission (SEC) that "the maximum offering size was determined in consideration of the requirement that our largest shareholder, SK Square, must hold at least 20% of our total outstanding shares under the Fair Trade Act."
Industry insiders believe that even if additional ADRs are issued, SK Square will be able to maintain its current stake.
This is because the company could repeat a process of increasing its stake through share buybacks and cancellations, followed by dilution through ADR issuance.
Kim Hoe-jae, a researcher at Daishin Securities, predicted, "If SK Hynix utilizes a portion of its cash flow for share buybacks and cancellations, SK Square's stock price is expected to rise alongside the increase in SK Hynix's stock price."
However, some observers point out that since the repetitive process of share buybacks and cancellations during additional ADR listings would inevitably require massive financial resources, long-term capacity for shareholder returns and capital procurement will be necessary.
(Photo: Yonhap News)
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