Sk Telecom Co Ltd (NYSE: SKM)

Sector: Communication Services Industry: Telecom Services CIK: 0001015650
Market Cap 13.25 Bn
P/B 1.59
P/E 31.62
P/S 1.07
ROIC (Qtr) 6,693.78
Div Yield % 2.21
Rev 1y % (Qtr) -17.85
Total Debt (Qtr) 7.74 Bn
Debt/Equity (Qtr) 0.93
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About

SK Telecom Co Ltd, also known as SKM, is a prominent player in the wireless communication industry, specifically in South Korea. The company's primary business activities include the provision of mobile telecommunications services, such as voice, data, and multimedia services, to a diverse range of customers, from individual subscribers to large corporations and government agencies. SK Telecom's revenue is primarily generated through the sale of mobile telecommunications services, as well as the sale of handsets and other telecommunications equipment....

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Investment thesis

Bull case

  • Operating cash flow of 2.92B provides exceptional 47.50x coverage of minority interest expenses 61.56M, showing strong core operations.
  • Tangible assets of 17.90B provide exceptional 69.17x coverage of deferred revenue 258.73M, showing strong service capability backing.
  • Operating cash flow of 2.92B provides strong 11.30x coverage of deferred revenue 258.73M, indicating service delivery capability.
  • Robust tangible asset base of 17.90B provides 57.32x coverage of working capital 312.25M, indicating strong operational backing.
  • Cash position of 989.16M provides exceptional 16.07x coverage of minority interest expenses 61.56M, indicating strong liquidity.

Bear case

  • Operating cash flow of 2.92B barely covers its investment activities of (1.77B), with a coverage ratio of -1.65, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Cash reserves of 989.16M provide limited coverage of acquisition spending of (290.87M), which is -3.40x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 1.93B relative to inventory of 160.81M (12.01 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Free cash flow of 1.19B represents just -5.70x of debt issuance (209.37M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Short-term investments of 282.44M represent 0.90x of working capital 312.25M, suggesting potentially excessive financial asset allocation versus operational needs.

Peer comparison

Companies in the Telecom Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 TMUS T-Mobile US, Inc. 247.58 Bn 22.52 2.80 118.74 Bn
2 T At&T Inc. 210.50 Bn 12.86 1.15 155.04 Bn
3 VZ Verizon Communications Inc 202.20 Bn 11.00 1.54 181.64 Bn
4 CMCSA Comcast Corp 180.83 Bn 58.43 5.08 98.94 Bn
5 VOD Vodafone Group Public Ltd Co 44.88 Bn 3.20 0.62 60.54 Bn
6 CHT Chunghwa Telecom Co Ltd 33.41 Bn 26.87 4.32 1.20 Bn
7 SATS EchoStar CORP 32.60 Bn -2.52 2.15 30.58 Bn
8 CHTR Charter Communications, Inc. /Mo/ 32.03 Bn 6.42 0.58 96.20 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.24 0.87
EV to Cash from Ops. EV/CFO 1.70 7.73
EV to Debt EV to Debt 0.64 40.31
EV to EBIT EV/EBIT 4.65 2.24
EV to EBITDA EV/EBITDA 4.23 2.53
EV to Free Cash Flow [EV/FCF] EV/FCF 4.17 33.34
EV to Market Cap EV to Market Cap 0.38 1.71
EV to Revenue EV/Rev 0.40 5.12
Price to Book Value [P/B] P/B 1.59 2.16
Price to Earnings [P/E] P/E 31.62 76.35
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 -0.17
Dividend Payout Ratio % Div Payout % (Qtr) 69.80 2.05
Dividend per Basic Share Div per Share (Qtr) 0.74 0.79
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.02 8.04
Interest Coverage Int. cover (Qtr) 2.86 -2.53
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 12.35 19.27
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -34.09 61.85
Dividend Growth (1y) % Div 1y % (Qtr) 10.81 -2.07
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -47.18 373.65
EBITDA Growth (1y) % EBITDA Growth (1y) % 0.00 192.47
EBIT Growth (1y) % EBIT 1y % (Qtr) -31.49 814.56
EBT Growth (1y) % EBT 1y % (Qtr) -37.26 -29.03
EPS Growth (1y) % EPS 1y % (Qtr) -52.44 141.81
FCF Growth (1y) % FCF 1y % (Qtr) -35.99 78.17
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -10.79 -10.71
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.00 0.60
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.06
Cash Ratio Cash Ratio (Qtr) 0.21 0.68
Current Ratio Curr Ratio (Qtr) 1.07 1.56
Debt to Equity Ratio Debt/Equity (Qtr) 0.93 -0.46
Interest Cover Ratio Int Coverage (Qtr) 2.86 -2.53
Times Interest Earned Times Interest Earned (Qtr) 2.86 -2.53
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % 0.00 46.49
EBIT Margin % EBIT Margin % (Qtr) 12,100.42 -51.60
EBT Margin % EBT Margin % (Qtr) 5.63 27.73
Gross Margin % Gross Margin % (Qtr) 73.40 55.49
Net Profit Margin % Net Margin % (Qtr) 3.40 26.33