Sk Telecom Net Income jumped on 10.4% in 2016 and EBITDA Margin showed almost no change
03 Feb 2017 • About Sk Telecom (
$SKMD) • By InTwits
Sk Telecom reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Sk Telecom has high CAPEX intensity: 5 year average CAPEX/Revenue was 17.0%. At the same time it's a lot of higher than industry average of 13.4%.
- CAPEX is quite volatile: 2,324,112 in 2016, 2,560,244 in 2015, 3,505,549 in 2014, 6,569,613 in 2013, 7,054,543 in 2012
- The company has potentially unprofitable business model: ROIC is at 6.3%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.3x while industry average is 1.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Sk Telecom ($SKMD) key annual financial indicators
| mln. KRW | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 16,141,409 | 16,602,054 | 17,163,798 | 17,136,734 | 17,091,816 | -0.3% |
| Gross Profit | 14,849,105 | 15,301,679 | 15,483,688 | 15,180,873 | 15,253,448 | 0.5% |
| SG&A | 10,346,879 | 10,223,577 | 10,507,156 | 10,251,332 | 10,393,211 | 1.4% |
| EBITDA | 4,343,069 | 4,840,893 | 4,716,975 | 4,701,492 | 4,604,302 | -2.1% |
| Net Income | 1,151,700 | 1,638,960 | 1,801,180 | 1,518,600 | 1,675,970 | 10.4% |
Balance Sheet
|
|---|
| Cash | 920,125 | 1,398,639 | 834,429 | 768,922 | 1,505,242 | 95.8% |
| Short Term Debt | 1,493,111 | 1,528,427 | 961,118 | 1,083,298 | 1,192,854 | 10.1% |
| Long Term Debt | 5,370,493 | 5,014,255 | 5,798,904 | 6,560,700 | 6,478,646 | -1.3% |
Cash flow
|
|---|
| Capex | 3,394,349 | 2,879,126 | 3,008,026 | 2,478,778 | 2,490,455 | 0.5% |
Ratios
|
|---|
| Revenue growth | 1.3% | 2.9% | 3.4% | -0.2% | -0.3% | |
| EBITDA growth | -8.3% | 11.5% | -2.6% | -0.3% | -2.1% | |
| Gross Margin | 92.0% | 92.2% | 90.2% | 88.6% | 89.2% | 0.7% |
| EBITDA Margin | 26.9% | 29.2% | 27.5% | 27.4% | 26.9% | -0.5% |
| Net Income Margin | 7.1% | 9.9% | 10.5% | 8.9% | 9.8% | 0.9% |
| SG&A, % of revenue | 64.1% | 61.6% | 61.2% | 59.8% | 60.8% | 1.0% |
| CAPEX, % of revenue | 21.0% | 17.3% | 17.5% | 14.5% | 14.6% | 0.1% |
| ROIC | 8.9% | 9.8% | 8.3% | 7.3% | 6.3% | -1.0% |
| ROE | 9.8% | 12.9% | 12.8% | 10.1% | 10.6% | 0.5% |
| Net Debt/EBITDA | 1.4x | 1.1x | 1.3x | 1.5x | 1.3x | -0.1x |
Revenue and profitability
Sk Telecom's Revenue showed almost no change in 2016. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.8 pp from 9.7% to 11.4% in 2016.
Gross Margin increased slightly on 0.66 pp from 88.6% to 89.2% in 2016. SG&A as a % of Revenue increased slightly on 0.99 pp from 59.8% to 60.8% in 2016.
Net Income marign increased slightly on 0.94 pp from 8.9% to 9.8% in 2016.
Capital expenditures (CAPEX) and working capital investments
Sk Telecom's CAPEX/Revenue was 14.6% in 2016. CAPEX/Revenue decreased on 2.8 pp from 17.3% in 2013 to 14.6% in 2016. It's average level of CAPEX/Revenue for the last three years was 15.5%.The company invested a big chunk of EBITDA (54.1%) to CAPEX which didn't stop revenue from falling.
Return on investment
The company operates at low ROIC (6.26%) and ROE (10.63%). ROIC decreased slightly on 1.0 pp from 7.3% to 6.3% in 2016. ROE increased slightly on 0.53 pp from 10.1% to 10.6% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.3x and Debt / EBITDA is 1.7x. Net Debt / EBITDA dropped on 0.1x from 1.5x to 1.3x in 2016. Debt showed almost no change in 2016 while cash jumped on 95.8% in 2016.
Valuation
The company's trades at EV/EBITDA 1.3x and P/E 0.0x while industy averages are 15.6x and 19.1x. Sk Telecom's EV/(EBITDA-CAPEX) is 2.9x with the industry average at 19.0x.
Appendix 1: Peers in Mobile Telecommunications
Below we provide Sk Telecom benchmarking against other companies in Mobile Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Zamano ($ZMNO) | 28.0% | -16.5% | 23.9% | 22.3% | |
| Sistema Jsfc ($SSAA) | 9.7% | -44.6% | 8.7% | 10.6% | |
| Megafon OJSC ($MFON) | 12.3% | 9.1% | 5.9% | -0.4% | |
| Monitise ($MONI) | | 101.7% | 30.6% | -5.7% | -24.7% |
| Kcell JSC ($KCEL) | | 3.1% | -0.0% | -10.2% | -12.7% |
| |
|---|
| Median (7 companies) | 11.0% | 3.1% | 5.9% | -5.7% | -24.7% |
|---|
| Sk Telecom ($SKMD) | | 2.9% | 3.4% | -0.2% | -0.3% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Global Telecom Hldg Sae ($GLTD) | 57.6% | 82.1% | 83.4% | 81.8% | |
| Megafon OJSC ($MFON) | 75.4% | 74.6% | 73.1% | 73.1% | |
| Monitise ($MONI) | 66.4% | 75.8% | 64.9% | 51.8% | 57.5% |
| Sistema Jsfc ($SSAA) | 59.5% | 54.4% | 50.4% | 46.7% | |
| Kcell JSC ($KCEL) | 58.1% | 57.6% | 55.1% | 46.6% | 37.5% |
| |
|---|
| Median (7 companies) | 58.1% | 57.6% | 55.1% | 46.7% | 37.5% |
|---|
| Sk Telecom ($SKMD) | 92.0% | 92.2% | 90.2% | 88.6% | 89.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kcell JSC ($KCEL) | 55.3% | 55.8% | 55.5% | 45.8% | |
| Global Telecom Hldg Sae ($GLTD) | 50.8% | 12.1% | 42.8% | 43.9% | |
| Megafon OJSC ($MFON) | 42.4% | 44.2% | 43.5% | 41.9% | |
| Monitise ($MONI) | -36.7% | -5.1% | -21.1% | 40.0% | -58.6% |
| Sistema Jsfc ($SSAA) | 20.1% | 33.3% | 23.9% | 22.5% | |
| |
|---|
| Median (7 companies) | 20.1% | 15.9% | 23.9% | 40.0% | -32.4% |
|---|
| Sk Telecom ($SKMD) | 26.9% | 29.2% | 27.5% | 27.4% | 26.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Global Telecom Hldg Sae ($GLTD) | 8.6% | 15.7% | 36.5% | 26.2% | |
| Megafon OJSC ($MFON) | 17.1% | 14.5% | 18.5% | 20.1% | |
| Sistema Jsfc ($SSAA) | 11.3% | 13.3% | 14.2% | 15.0% | |
| Kcell JSC ($KCEL) | 12.8% | 9.2% | 9.6% | 9.5% | 29.8% |
| Monitise ($MONI) | 8.7% | 7.0% | 5.1% | 4.6% | 1.3% |
| |
|---|
| Median (7 companies) | 8.7% | 9.2% | 9.6% | 9.5% | 1.3% |
|---|
| Sk Telecom ($SKMD) | 21.0% | 17.3% | 17.5% | 14.5% | 14.6% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kcell JSC ($KCEL) | 63.7% | 66.0% | 62.9% | 40.2% | 23.9% |
| Mobile Streams ($MOS) | | 216.7% | 11.3% | 24.0% | -35.3% |
| Zamano ($ZMNO) | 31.4% | 30.9% | 25.5% | 23.3% | |
| Megafon OJSC ($MFON) | 21.0% | 27.7% | 23.7% | 19.6% | |
| Global Telecom Hldg Sae ($GLTD) | 17.8% | -6.9% | 17.4% | 14.7% | |
| |
|---|
| Median (7 companies) | 19.4% | 27.7% | 17.4% | 19.6% | -35.3% |
|---|
| Sk Telecom ($SKMD) | 8.9% | 9.8% | 8.3% | 7.3% | 6.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Sistema Jsfc ($SSAA) | 2.0x | 1.5x | 2.7x | 3.5x | |
| Global Telecom Hldg Sae ($GLTD) | 1.5x | 5.6x | 2.0x | 1.6x | |
| Megafon OJSC ($MFON) | 1.2x | 1.1x | 1.4x | 1.5x | |
| Kcell JSC ($KCEL) | 0.5x | 0.1x | 0.1x | 0.2x | |
| Zamano ($ZMNO) | -0.1x | -0.8x | -1.7x | -2.1x | |
| |
|---|
| Median (7 companies) | 0.9x | 0.6x | 0.7x | 0.2x | |
|---|
| Sk Telecom ($SKMD) | 1.4x | 1.1x | 1.3x | 1.5x | 1.3x |
