Align Discloses 1.5% Stake in SK Inc., Says Holding-Company Discount Must Be Addressed

Activist fund Align Partners Capital Management disclosed a 1.5% stake in SK Inc., the holding company of South Korea's SK Group, and said the company remains undervalued. It argued that the earnings and share-price performance of SK Hynix, an indirect subsidiary, are not being fully reflected in SK Inc.'s valuation.

Lee Chang-hwan, chief executive of Align Partners, presented the case on Oct. 20 at the 13D Monitor conference in New York. Align said funds it manages and advises hold about 1.5% of SK Inc.

Align said SK Inc. has a world-class foundation in artificial intelligence businesses, yet trades at the lowest valuation among Kospi 200 companies. According to the fund, the consensus forecast for SK Inc.'s net profit next year is about 24.4 trillion won ($17.7 billion). That is roughly in line with SK Inc.'s market capitalization of about 24.9 trillion won ($18.0 billion) as of Oct. 16, leaving the stock trading at a price-to-earnings ratio of just 1.0.

SK Inc.'s net asset value stands at 100 trillion won ($72.5 billion), implying a 75.0% discount to market capitalization. "SK Inc.'s market capitalization is less than half the roughly 60 trillion won ($43.5 billion) value of its indirect stake in SK Hynix through subsidiary SK Square," Align said. The fund said SK Inc.'s value-up plan, due later this year, could act as a catalyst to narrow the discount. It also said the presentation does not signal the start of an activist campaign targeting SK Inc.

Seo Hyeong-gyo, Hankyung.com reporter seogyo@hankyung.com