Sk Telecom reports 17.6% CAPEX decline and almost no change in Revenue of 17,136,734
02 Feb 2016 • About Sk Telecom (
$SKMD) • By InTwits
Sk Telecom reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Sk Telecom has high CAPEX intensity: 5 year average CAPEX/Revenue was 17.8%. At the same time it's a lot of higher than industry average of 14.0%.
- CAPEX is quite volatile: 2,560,244 in 2015, 3,505,549 in 2014, 6,569,613 in 2013, 7,054,543 in 2012, 5,330,968 in 2011
- The company has business model with low profitability: ROIC is at 7.3%
- It operates with high leverage: Net Debt/EBITDA is 1.5x while industry average is 0.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Sk Telecom ($SKMD) key annual financial indicators
| mln. KRW | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 15,938,549 | 16,141,409 | 16,602,054 | 17,163,798 | 17,136,734 | -0.2% |
| Gross Profit | 14,979,273 | 14,849,105 | 15,301,679 | 15,483,688 | 15,180,873 | -2.0% |
| SG&A | 10,042,725 | 10,346,879 | 10,223,577 | 10,507,156 | 10,251,332 | -2.4% |
| EBITDA | 4,735,154 | 4,343,069 | 4,840,893 | 4,716,975 | 4,701,492 | -0.3% |
| Net Income | 1,612,890 | 1,151,700 | 1,638,960 | 1,801,180 | 1,518,600 | -15.7% |
Balance Sheet
|
|---|
| Cash | 1,650,794 | 920,125 | 1,398,639 | 834,429 | 768,922 | -7.9% |
| Short Term Debt | 2,363,554 | 1,493,111 | 1,528,427 | 961,118 | 1,083,298 | 12.7% |
| Long Term Debt | 3,594,801 | 5,370,493 | 5,014,255 | 5,798,904 | 6,560,700 | 13.1% |
Cash flow
|
|---|
| Capex | 2,960,557 | 3,394,349 | 2,879,126 | 3,008,026 | 2,478,778 | -17.6% |
Ratios
|
|---|
| Revenue growth | 2.7% | 1.3% | 2.9% | 3.4% | -0.2% | |
| EBITDA growth | -2.9% | -8.3% | 11.5% | -2.6% | -0.3% | |
| Gross Margin | 94.0% | 92.0% | 92.2% | 90.2% | 88.6% | -1.6% |
| EBITDA Margin | 29.7% | 26.9% | 29.2% | 27.5% | 27.4% | -0.0% |
| Net Income Margin | 10.1% | 7.1% | 9.9% | 10.5% | 8.9% | -1.6% |
| SG&A, % of revenue | 63.0% | 64.1% | 61.6% | 61.2% | 59.8% | -1.4% |
| CAPEX, % of revenue | 18.6% | 21.0% | 17.3% | 17.5% | 14.5% | -3.1% |
| ROIC | 11.9% | 8.9% | 9.8% | 8.3% | 7.3% | -1.0% |
| ROE | 14.0% | 9.8% | 12.9% | 12.8% | 10.1% | -2.7% |
| Net Debt/EBITDA | 0.9x | 1.4x | 1.1x | 1.3x | 1.5x | 0.2x |
Revenue and profitability
Sk Telecom's Revenue showed almost no change in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 4.3 pp from 10.9% to 15.2% in 2015.
Gross Margin decreased slightly on 1.6 pp from 90.2% to 88.6% in 2015. SG&A as a % of Revenue decreased slightly on 1.4 pp from 61.2% to 59.8% in 2015.
Net Income marign decreased slightly on 1.6 pp from 10.5% to 8.9% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 the company had CAPEX/Revenue of 14.5%. The company showed decline in CAPEX/Revenue of 6.6 pp from 21.0% in 2012 to 14.5% in 2015. It's average CAPEX/Revenue for the last three years was 16.4%.Battling declining revenue Sk Telecom invested a large share of EBITDA (52.7%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (7.28%) and ROE (10.09%). ROIC decreased slightly on 1.0 pp from 8.3% to 7.3% in 2015. ROE decreased on 2.7 pp from 12.8% to 10.1% in 2015.
Leverage (Debt)
Debt level is 1.5x Net Debt / EBITDA and 1.6x Debt / EBITDA. Net Debt / EBITDA surged on 0.2x from 1.3x to 1.5x in 2015. Debt jumped on 13.1% in 2015 while cash decreased on 7.9% in 2015.
Valuation
Sk Telecom's trades at EV/EBITDA 1.5x and P/E 0.0x while industy averages are 10.5x and 26.1x. Sk Telecom's EV/(EBITDA-CAPEX) is 3.1x with the industry average at 4.7x.
Appendix 1: Peers in Mobile Telecommunications
Below you can find Sk Telecom benchmarking vs. other companies in Mobile Telecommunications industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Monitise ($MONI) | | 136.2% | 101.7% | 30.6% | -5.7% |
| Zamano ($ZMNO) | -5.0% | 28.0% | -16.5% | 23.9% | |
| Sistema Jsfc ($SSAA) | 19.1% | 9.7% | -44.6% | 8.7% | |
| Megafon OJSC ($MFON) | 12.6% | 12.3% | 9.1% | 5.9% | |
| Kcell JSC ($KCEL) | | 1.8% | 3.1% | -0.0% | -10.2% |
| |
|---|
| Median (6 companies) | 7.3% | 11.0% | -0.7% | 7.3% | -7.9% |
|---|
| Sk Telecom ($SKMD) | | 1.3% | 2.9% | 3.4% | -0.2% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Global Telecom Hldg Sae ($GLTD) | 55.9% | 57.6% | 82.1% | 83.4% | |
| Megafon OJSC ($MFON) | 75.7% | 75.4% | 74.6% | 73.1% | |
| Monitise ($MONI) | 61.5% | 66.4% | 75.8% | 64.9% | 51.8% |
| Kcell JSC ($KCEL) | 60.9% | 58.1% | 57.6% | 55.1% | 46.6% |
| Sistema Jsfc ($SSAA) | 59.6% | 59.5% | 54.4% | 50.4% | |
| |
|---|
| Median (6 companies) | 60.2% | 58.8% | 66.1% | 60.0% | 49.2% |
|---|
| Sk Telecom ($SKMD) | 94.0% | 92.0% | 92.2% | 90.2% | 88.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Kcell JSC ($KCEL) | 59.2% | 55.3% | 55.8% | 55.5% | 45.8% |
| Megafon OJSC ($MFON) | 41.6% | 42.4% | 44.2% | 43.5% | |
| Global Telecom Hldg Sae ($GLTD) | 49.2% | 50.8% | 12.1% | 42.8% | |
| Sistema Jsfc ($SSAA) | 21.5% | 20.1% | 33.3% | 23.9% | |
| Zamano ($ZMNO) | 2.4% | 13.1% | 15.9% | 13.4% | |
| |
|---|
| Median (6 companies) | 31.5% | 31.3% | 24.6% | 33.3% | 42.9% |
|---|
| Sk Telecom ($SKMD) | 29.7% | 26.9% | 29.2% | 27.5% | 27.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Global Telecom Hldg Sae ($GLTD) | 12.4% | 8.6% | 15.7% | 36.5% | |
| Megafon OJSC ($MFON) | 30.2% | 17.1% | 14.5% | 18.5% | |
| Sistema Jsfc ($SSAA) | 11.2% | 11.3% | 13.3% | 14.2% | |
| Kcell JSC ($KCEL) | 13.7% | 12.8% | 9.2% | 9.6% | 9.5% |
| Monitise ($MONI) | 15.0% | 8.7% | 7.0% | 5.1% | 4.6% |
| |
|---|
| Median (6 companies) | 13.1% | 10.0% | 11.2% | 11.9% | 7.1% |
|---|
| Sk Telecom ($SKMD) | 18.6% | 21.0% | 17.3% | 17.5% | 14.5% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Kcell JSC ($KCEL) | 69.2% | 63.7% | 66.0% | 62.9% | 40.2% |
| Zamano ($ZMNO) | -4.4% | 31.4% | 30.9% | 25.5% | |
| Megafon OJSC ($MFON) | 17.4% | 21.0% | 27.7% | 23.7% | |
| Global Telecom Hldg Sae ($GLTD) | 15.4% | 17.8% | -6.9% | 17.4% | |
| Sistema Jsfc ($SSAA) | 12.1% | 11.7% | 12.1% | 8.3% | |
| |
|---|
| Median (6 companies) | 13.7% | 19.4% | 19.9% | 20.5% | 8.0% |
|---|
| Sk Telecom ($SKMD) | 11.9% | 8.9% | 9.8% | 8.3% | 7.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Sistema Jsfc ($SSAA) | 2.1x | 2.0x | 1.5x | 2.7x | |
| Global Telecom Hldg Sae ($GLTD) | 1.7x | 1.5x | 5.6x | 2.0x | |
| Megafon OJSC ($MFON) | 0.4x | 1.2x | 1.1x | 1.4x | |
| Kcell JSC ($KCEL) | -0.0x | 0.5x | 0.1x | 0.1x | 0.2x |
| Zamano ($ZMNO) | 12.4x | -0.1x | -0.8x | -1.7x | |
| |
|---|
| Median (5 companies) | 1.7x | 1.2x | 1.1x | 1.4x | -1.0x |
|---|
| Sk Telecom ($SKMD) | 0.9x | 1.4x | 1.1x | 1.3x | 1.5x |
