SK Square Jumps 192% This Year as Investors Seek SK Hynix Proxy

Stock Focus

SK Square Tops 130 Trillion Won in Market Value on SK Hynix Stake

Nears 1 Million Won 'Emperor Stock' Status

Fund Limits on SK Hynix Lift SK Square as Institutional Alternative

AI, Chip Bets and Value-Up Push Re-Rating

Shares Have Soared 192% This Year

SK Square's market capitalization has surpassed 130 trillion won, allowing it to hold onto the No. 3 spot on South Korea's benchmark stock market. Brokerages say the rally is more than a play on the semiconductor supercycle, citing the investment holding company's portfolio rebalancing and corporate value-enhancement efforts as key drivers of the market's re-rating.

Share Price Has Nearly Tripled This Year

According to the Korea Exchange on May 4, SK Square surged 17.84% from the previous trading day to 991,000 won, leaving it just shy of 'emperor stock' status, a term for shares trading above 1 million won each. The stock has climbed 191.5% this year, lifting its market value to about 130.7707 trillion won. SK Square was still ranked fifth by market capitalization as of April 29, behind Hyundai Motor Co. and LG Energy Solution Ltd., but moved into third place on April 30. With the stock spiking again on May 4, it widened its lead over LG Energy Solution, whose market capitalization stood at 110.448 trillion won, and Hyundai Motor, at 110.3644 trillion won.

Growth at subsidiary SK Hynix has also boosted SK Square's valuation. SK Hynix accounts for the biggest share of SK Square's net asset value. In January, SK Hynix paid SK Square about 438.3 billion won in dividends for the previous year.

SK Hynix canceled 2.1% of its treasury shares, or 15.3 million shares, increasing the value of SK Square's 20.5% stake. With equity funds capped at 10% for holdings in any single stock, institutional investors have had less room to add SK Hynix as its market value has swelled. That has raised SK Square's appeal as an alternative way to gain exposure, according to the market. Choi Kwan-soon, an analyst at SK Securities, said the biggest beneficiary of SK Hynix's shareholder returns is SK Square, its largest shareholder.

Returns Have Outpaced SK Hynix

A stronger earnings outlook for SK Hynix is not the only reason behind SK Square's surge, market participants say.

SK Square has also been working to narrow the holding-company discount. Its net asset value discount stood at 65.7% at the end of 2024, but improved to 42.4% as of April 30. The measure shows how far a company's share price trades below its net asset value.

SK Square said it is the only holding company using the NAV discount as a target in its corporate value-enhancement plan. The company aims to lower the discount to around 30% by 2028 and break away from the holding-company discount. Its return on equity reached 37.8% last year and is projected to rise to 87% this year, far above the 5% average for other holding companies.

SK Square plans to make new investments focused on artificial intelligence and semiconductor companies to secure longer-term growth drivers. Through TGC Square, its overseas investment unit, the company is seeking promising AI and chip companies in the US and Japan.

Representative investments include Hammerspace, which develops solutions to address data bottlenecks during AI training, and d-Matrix, a US AI chip design company. In Japan, SK Square is investing in semiconductor materials, parts and equipment companies including iOcore and Link-US.

The company said it is looking for investable companies across the AI and semiconductor value chain.

An aggressive shareholder-return policy has also helped attract investors. SK Square plans to return a total of 310 billion won to shareholders from this year through early next year. For this year, it has scheduled its first cash dividend, a tax-free payout totaling 200 billion won, along with a 110 billion won share buyback. Ahn Jae-min, an analyst at NH Investment & Securities, said SK Group's expansion in semiconductors could be centered on SK Square. Active shareholder returns are also helping explain the stock's strong momentum, he added.

Oh Hyun-ah, Korea Economic Daily reporter 5hyun@hankyung.com