Value and GARP investors know that there will be times
where they must sift out the “cheap for good reasons” stocks from their
watch lists, and SK Telecom (SKM) is a tough case in that regard. Although I thought expectations were low for the stock back in December of 2015
(and the shares are up about 15% since then, lagging the KOSPI), I had
worries about management and competition that have lingered on to today.
The
mobile business remains a good source of cash flow, but management
hasn’t always (or perhaps even often) made good decisions about what to
do with that cash flow. Right now, a lot of controversy surrounds just
how far management will subsidize its SK Planet e-commerce operations
(specifically 11st.com) and whether the new CEO will once again take the
company down the path of M&A.
The shares do look meaningfully undervalued, but value of SK Telecom’s stakes in Hynix and POSCO (PKX)
are significant parts of that value (both shares have more than doubled
since late 2015) and Hynix in particular has been volatile over the
years. I’m still not sold on management, and I’d like to see a greater
commitment to returning cash to shareholders, but this could be a name
to consider on this recent pullback.
Read more here:
SK Telecom Undervalued, But There Are Still Valid Reasons Why
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