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SK Telecom Co., Ltd. (SKM) is trading at a forward multiple of 8x our fiscal year 2007 EPADR estimate, which is at a discount to its peers in the industry. Regulatory actions, in conjunction with on-going corporate governance concerns, have affected SKM more than its competitors. However, subscriber losses encouraged by number portability have leveled off domestically, and new international activities, in particular the partnership with China Unicom (CHU), present opportunistic growth in new markets.
The company has been buying back shares to bolster shareholder return. We also await signs of momentum with SK Telecom's business prospects with partner Earthlink (ELNK) in the United States.
The stock is trading at a P/E discount to most of its global wireless peers based on estimated 2008 earnings. Lower forecasted growth parameters, ongoing regulatory risk, and corporate governance concerns warrant the discount.
We believe the current valuation adequately reflects the company's progress and provides limited appreciation opportunity over the next six months. Downside is limited, in our view, and we provide a Hold rating until we have more visibility regarding international growth and improved earnings in 2008.
Read the full analyst report on SKM.
Read the full analyst report on CHU.
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