Intrinsic value of SK Telecom ADR - SKM

Previous Close

$25.34

  Intrinsic Value

$15.04

stock screener

  Rating & Target

sell

-41%

  Value-price divergence*

+5000%

Previous close

$25.34

 
Intrinsic value

$15.04

 
Up/down potential

-41%

 
Rating

sell

 
Value-price divergence*

+5000%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of SKM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 18.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.26
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  14,749
  15,044
  15,390
  15,786
  16,230
  16,722
  17,261
  17,849
  18,486
  19,171
  19,907
  20,694
  21,534
  22,428
  23,379
  24,387
  25,456
  26,587
  27,783
  29,047
  30,382
  31,790
  33,276
  34,841
  36,490
  38,228
  40,057
  41,982
  44,008
  46,139
  48,381
Variable operating expenses, $m
 
  13,566
  13,875
  14,227
  14,622
  15,061
  15,541
  16,065
  16,632
  17,242
  17,898
  18,432
  19,180
  19,977
  20,823
  21,721
  22,673
  23,681
  24,746
  25,872
  27,061
  28,315
  29,638
  31,033
  32,502
  34,049
  35,678
  37,393
  39,197
  41,096
  43,092
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  13,445
  13,566
  13,875
  14,227
  14,622
  15,061
  15,541
  16,065
  16,632
  17,242
  17,898
  18,432
  19,180
  19,977
  20,823
  21,721
  22,673
  23,681
  24,746
  25,872
  27,061
  28,315
  29,638
  31,033
  32,502
  34,049
  35,678
  37,393
  39,197
  41,096
  43,092
Operating income, $m
  1,304
  1,478
  1,515
  1,559
  1,607
  1,661
  1,720
  1,784
  1,854
  1,929
  2,009
  2,262
  2,354
  2,452
  2,555
  2,666
  2,783
  2,906
  3,037
  3,175
  3,321
  3,475
  3,637
  3,808
  3,989
  4,179
  4,379
  4,589
  4,810
  5,043
  5,288
EBITDA, $m
  3,952
  2,825
  2,890
  2,965
  3,048
  3,140
  3,242
  3,352
  3,472
  3,601
  3,739
  3,887
  4,044
  4,212
  4,391
  4,580
  4,781
  4,993
  5,218
  5,455
  5,706
  5,971
  6,249
  6,543
  6,853
  7,180
  7,523
  7,885
  8,265
  8,665
  9,086
Interest expense (income), $m
  226
  196
  205
  215
  227
  240
  255
  271
  288
  307
  327
  349
  372
  397
  423
  452
  481
  513
  547
  582
  619
  659
  701
  745
  791
  840
  891
  945
  1,002
  1,062
  1,125
Earnings before tax, $m
  1,809
  1,282
  1,311
  1,344
  1,380
  1,421
  1,465
  1,514
  1,566
  1,622
  1,682
  1,913
  1,982
  2,055
  2,132
  2,214
  2,301
  2,393
  2,490
  2,593
  2,702
  2,816
  2,937
  3,064
  3,198
  3,339
  3,487
  3,644
  3,808
  3,981
  4,163
Tax expense, $m
  376
  346
  354
  363
  373
  384
  396
  409
  423
  438
  454
  517
  535
  555
  576
  598
  621
  646
  672
  700
  729
  760
  793
  827
  863
  902
  942
  984
  1,028
  1,075
  1,124
Net income, $m
  1,446
  936
  957
  981
  1,008
  1,037
  1,070
  1,105
  1,143
  1,184
  1,228
  1,397
  1,447
  1,500
  1,556
  1,616
  1,680
  1,747
  1,818
  1,893
  1,972
  2,056
  2,144
  2,237
  2,334
  2,437
  2,546
  2,660
  2,780
  2,906
  3,039

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,718
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  27,007
  25,804
  26,398
  27,076
  27,838
  28,682
  29,608
  30,616
  31,708
  32,884
  34,146
  35,496
  36,936
  38,470
  40,101
  41,830
  43,663
  45,604
  47,656
  49,824
  52,113
  54,529
  57,076
  59,762
  62,591
  65,571
  68,708
  72,010
  75,485
  79,141
  82,986
Adjusted assets (=assets-cash), $m
  25,289
  25,804
  26,398
  27,076
  27,838
  28,682
  29,608
  30,616
  31,708
  32,884
  34,146
  35,496
  36,936
  38,470
  40,101
  41,830
  43,663
  45,604
  47,656
  49,824
  52,113
  54,529
  57,076
  59,762
  62,591
  65,571
  68,708
  72,010
  75,485
  79,141
  82,986
Revenue / Adjusted assets
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
Average production assets, $m
  11,581
  11,810
  12,081
  12,392
  12,740
  13,126
  13,550
  14,012
  14,511
  15,049
  15,627
  16,245
  16,904
  17,606
  18,352
  19,144
  19,983
  20,871
  21,810
  22,802
  23,850
  24,955
  26,121
  27,350
  28,645
  30,009
  31,445
  32,956
  34,546
  36,219
  37,979
Working capital, $m
  -386
  -1,369
  -1,400
  -1,436
  -1,477
  -1,522
  -1,571
  -1,624
  -1,682
  -1,745
  -1,812
  -1,883
  -1,960
  -2,041
  -2,127
  -2,219
  -2,316
  -2,419
  -2,528
  -2,643
  -2,765
  -2,893
  -3,028
  -3,171
  -3,321
  -3,479
  -3,645
  -3,820
  -4,005
  -4,199
  -4,403
Total debt, $m
  6,359
  5,856
  6,148
  6,483
  6,858
  7,274
  7,731
  8,228
  8,766
  9,346
  9,968
  10,633
  11,344
  12,100
  12,904
  13,756
  14,660
  15,617
  16,628
  17,697
  18,826
  20,017
  21,273
  22,597
  23,991
  25,460
  27,007
  28,635
  30,348
  32,150
  34,046
Total liabilities, $m
  13,225
  12,722
  13,014
  13,349
  13,724
  14,140
  14,597
  15,094
  15,632
  16,212
  16,834
  17,499
  18,210
  18,966
  19,770
  20,622
  21,526
  22,483
  23,494
  24,563
  25,692
  26,883
  28,139
  29,463
  30,857
  32,326
  33,873
  35,501
  37,214
  39,016
  40,912
Total equity, $m
  13,782
  13,083
  13,384
  13,728
  14,114
  14,542
  15,011
  15,522
  16,076
  16,672
  17,312
  17,996
  18,727
  19,504
  20,331
  21,208
  22,137
  23,121
  24,162
  25,261
  26,422
  27,646
  28,938
  30,299
  31,734
  33,244
  34,835
  36,509
  38,271
  40,124
  42,074
Total liabilities and equity, $m
  27,007
  25,805
  26,398
  27,077
  27,838
  28,682
  29,608
  30,616
  31,708
  32,884
  34,146
  35,495
  36,937
  38,470
  40,101
  41,830
  43,663
  45,604
  47,656
  49,824
  52,114
  54,529
  57,077
  59,762
  62,591
  65,570
  68,708
  72,010
  75,485
  79,140
  82,986
Debt-to-equity ratio
  0.461
  0.450
  0.460
  0.470
  0.490
  0.500
  0.510
  0.530
  0.550
  0.560
  0.580
  0.590
  0.610
  0.620
  0.630
  0.650
  0.660
  0.680
  0.690
  0.700
  0.710
  0.720
  0.740
  0.750
  0.760
  0.770
  0.780
  0.780
  0.790
  0.800
  0.810
Adjusted equity ratio
  0.477
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507
  0.507

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,446
  936
  957
  981
  1,008
  1,037
  1,070
  1,105
  1,143
  1,184
  1,228
  1,397
  1,447
  1,500
  1,556
  1,616
  1,680
  1,747
  1,818
  1,893
  1,972
  2,056
  2,144
  2,237
  2,334
  2,437
  2,546
  2,660
  2,780
  2,906
  3,039
Depreciation, amort., depletion, $m
  2,648
  1,348
  1,375
  1,406
  1,441
  1,479
  1,522
  1,568
  1,618
  1,672
  1,729
  1,624
  1,690
  1,761
  1,835
  1,914
  1,998
  2,087
  2,181
  2,280
  2,385
  2,496
  2,612
  2,735
  2,865
  3,001
  3,144
  3,296
  3,455
  3,622
  3,798
Funds from operations, $m
  3,268
  2,284
  2,332
  2,387
  2,448
  2,517
  2,592
  2,673
  2,761
  2,856
  2,957
  3,021
  3,137
  3,260
  3,392
  3,531
  3,678
  3,834
  3,999
  4,173
  4,357
  4,551
  4,756
  4,972
  5,199
  5,438
  5,690
  5,956
  6,235
  6,528
  6,837
Change in working capital, $m
  -394
  -27
  -31
  -36
  -40
  -45
  -49
  -53
  -58
  -62
  -67
  -72
  -76
  -81
  -86
  -92
  -97
  -103
  -109
  -115
  -121
  -128
  -135
  -142
  -150
  -158
  -166
  -175
  -184
  -194
  -204
Cash from operations, $m
  3,662
  2,310
  2,363
  2,423
  2,489
  2,562
  2,641
  2,726
  2,819
  2,918
  3,024
  3,093
  3,213
  3,342
  3,478
  3,622
  3,775
  3,937
  4,108
  4,288
  4,479
  4,679
  4,891
  5,114
  5,349
  5,596
  5,857
  6,131
  6,419
  6,722
  7,041
Maintenance CAPEX, $m
  0
  -1,158
  -1,181
  -1,208
  -1,239
  -1,274
  -1,313
  -1,355
  -1,401
  -1,451
  -1,505
  -1,563
  -1,624
  -1,690
  -1,761
  -1,835
  -1,914
  -1,998
  -2,087
  -2,181
  -2,280
  -2,385
  -2,496
  -2,612
  -2,735
  -2,865
  -3,001
  -3,144
  -3,296
  -3,455
  -3,622
New CAPEX, $m
  -2,697
  -229
  -272
  -310
  -349
  -386
  -424
  -461
  -500
  -538
  -578
  -618
  -659
  -702
  -746
  -792
  -839
  -888
  -939
  -992
  -1,048
  -1,106
  -1,166
  -1,229
  -1,295
  -1,364
  -1,436
  -1,511
  -1,590
  -1,673
  -1,760
Cash from investing activities, $m
  -2,125
  -1,387
  -1,453
  -1,518
  -1,588
  -1,660
  -1,737
  -1,816
  -1,901
  -1,989
  -2,083
  -2,181
  -2,283
  -2,392
  -2,507
  -2,627
  -2,753
  -2,886
  -3,026
  -3,173
  -3,328
  -3,491
  -3,662
  -3,841
  -4,030
  -4,229
  -4,437
  -4,655
  -4,886
  -5,128
  -5,382
Free cash flow, $m
  1,537
  924
  911
  904
  901
  901
  904
  910
  918
  929
  942
  912
  930
  949
  971
  996
  1,022
  1,051
  1,082
  1,115
  1,151
  1,189
  1,230
  1,273
  1,319
  1,368
  1,420
  1,475
  1,533
  1,594
  1,659
Issuance/(repayment) of debt, $m
  -203
  266
  293
  334
  375
  416
  457
  497
  538
  580
  622
  666
  710
  756
  804
  853
  904
  957
  1,012
  1,069
  1,129
  1,191
  1,256
  1,324
  1,395
  1,469
  1,547
  1,628
  1,713
  1,802
  1,896
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -293
  266
  293
  334
  375
  416
  457
  497
  538
  580
  622
  666
  710
  756
  804
  853
  904
  957
  1,012
  1,069
  1,129
  1,191
  1,256
  1,324
  1,395
  1,469
  1,547
  1,628
  1,713
  1,802
  1,896
Total cash flow (excl. dividends), $m
  1,244
  1,189
  1,203
  1,239
  1,277
  1,317
  1,361
  1,407
  1,456
  1,509
  1,564
  1,578
  1,640
  1,706
  1,775
  1,848
  1,926
  2,007
  2,093
  2,184
  2,279
  2,380
  2,486
  2,597
  2,714
  2,837
  2,967
  3,103
  3,246
  3,397
  3,555
Retained Cash Flow (-), $m
  -622
  -250
  -301
  -344
  -386
  -428
  -469
  -511
  -553
  -596
  -640
  -685
  -730
  -778
  -826
  -877
  -929
  -984
  -1,040
  -1,099
  -1,161
  -1,225
  -1,292
  -1,361
  -1,434
  -1,511
  -1,591
  -1,674
  -1,762
  -1,853
  -1,950
Prev. year cash balance distribution, $m
 
  949
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,889
  902
  895
  890
  889
  891
  896
  903
  912
  924
  893
  910
  928
  949
  971
  996
  1,024
  1,053
  1,085
  1,119
  1,155
  1,194
  1,236
  1,280
  1,326
  1,376
  1,429
  1,484
  1,543
  1,606
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,811
  826
  779
  733
  689
  647
  605
  564
  524
  485
  424
  388
  353
  318
  285
  253
  223
  194
  167
  142
  119
  99
  81
  65
  52
  40
  31
  23
  17
  12
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

SK Telecom Co., Ltd. provides wireless telecommunications services in South Korea. It offers wireless voice transmission services; cellular global roaming services; and interconnection services to connect its networks to fixed-line and other wireless networks. The company also provides wireless data communication services that allow subscribers to text, graphic, audio, and video messages; and wireless Internet services. In addition, it offers broadband Internet access; video-on-demand and Internet protocol TV services; and fixed-line telephone services, such as local, domestic long distance, international long distance, and voice over Internet protocol services. Further, the company provides business communications services, including leased line solutions, Internet data center solutions, and network solution services; engages in marketplace and O2O commerce businesses; manufactures and sells projection display devices, high-end audio devices, and intelligent agent machines; and offers a portal service under Nate brand name. As of December 31, 2015, it had 28.6 million wireless subscribers. SK Telecom Co., Ltd. has a collaboration agreement with Deutsche Telekom AG, Huawei, AT&T, Nokia, Ericsson, Qualcomm Technologies, and Samsung for the development and standardization of 5G. The company was formerly known as Korea Mobile Telecommunications Co., Ltd. and changed its name to SK Telecom Co., Ltd. in March 1997. SK Telecom Co., Ltd. was founded in 1984 and is headquartered in Seoul, South Korea.

FINANCIAL RATIOS  of  SK Telecom ADR (SKM)

Valuation Ratios
P/E Ratio 1.2
Price to Sales 0.1
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow 0.5
Price to Free Cash Flow 1.9
Growth Rates
Sales Growth Rate -0.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.9%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 40.6%
Total Debt to Equity 46.1%
Interest Coverage 9
Management Effectiveness
Return On Assets 6.3%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 7.6%
Return On Equity 10.7%
Return On Equity - 3 Yr. Avg. 11.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 94.4%
Gross Margin - 3 Yr. Avg. 94.3%
EBITDA Margin 31.8%
EBITDA Margin - 3 Yr. Avg. 31.5%
Operating Margin 8.8%
Oper. Margin - 3 Yr. Avg. 9.3%
Pre-Tax Margin 12.3%
Pre-Tax Margin - 3 Yr. Avg. 12.4%
Net Profit Margin 9.8%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 20.8%
Eff/ Tax Rate - 3 Yr. Avg. 22.2%
Payout Ratio 42.1%

SKM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SKM stock intrinsic value calculation we used $14749 million for the last fiscal year's total revenue generated by SK Telecom ADR. The default revenue input number comes from 2016 income statement of SK Telecom ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SKM stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for SKM is calculated based on our internal credit rating of SK Telecom ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of SK Telecom ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SKM stock the variable cost ratio is equal to 90.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SKM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for SK Telecom ADR.

Corporate tax rate of 27% is the nominal tax rate for SK Telecom ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SKM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SKM are equal to 78.5%.

Life of production assets of 10 years is the average useful life of capital assets used in SK Telecom ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SKM is equal to -9.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $13782 million for SK Telecom ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 729.875 million for SK Telecom ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of SK Telecom ADR at the current share price and the inputted number of shares is $18.5 billion.

RELATED COMPANIES Price Int.Val. Rating
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CHT Chunghwa Telec 33.77 11.66  str.sell
VZ Verizon Commun 47.69 42.08  hold

COMPANY NEWS

▶ SK Telecom Co. Ltd. Files its Annual Report on Form 20-F   [Apr-27-17 07:07AM  PR Newswire]
▶ If You're Retired, Consider Buying These 3 Stocks   [Apr-18-17 01:48PM  Motley Fool]
▶ SK Telecom opens Seoul campus for startups   [Apr-17-17 09:15PM  ZDNet]
▶ Buy These 4 Stocks with Increasing Cash Flows   [Mar-14-17 10:31AM  Zacks]
▶ SK Telecom to Participate in Mobile World Congress 2017   [Feb-22-17 09:18PM  PR Newswire]
▶ SK Telecom to Unveil '360 VR Live' at MWC 2017   [Feb-19-17 11:00PM  PR Newswire]
▶ Is Interactive Brokers Group, Inc. (IBKR) A Good Stock To Buy?   [Dec-10-16 04:47PM  at Insider Monkey]
▶ Should You Avoid Palo Alto Networks Inc (PANW)?   [Dec-07-16 06:20AM  at Insider Monkey]
▶ Do Hedge Funds Love Markel Corporation (MKL)?   [Dec-05-16 02:37AM  at Insider Monkey]
▶ Hedge Funds Are Getting the Heck Away From EQT Corporation (EQT)   [Dec-01-16 04:17PM  at Insider Monkey]
▶ What Hedge Funds Think about South Korean ADRs   [Jul-31-16 05:05PM  at Insider Monkey]
▶ 4 Stocks for Dividend- and Bargain-Seekers   [May-11-16 01:54PM  at TheStreet]
▶ SK TELECOM CO LTD Financials   [01:04PM  EDGAR Online Financials]
Stock chart of SKM Financial statements of SKM
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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