Sk Telecom Net Income surged on 20.3% and EBITDA Margin decreased slightly on 0.72 pp from 27.3% to 26.6%
30 Jan 2019 • About Sk Telecom (
$SKMD) • By InTwits
Sk Telecom reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 26.6% in 2018 vs. 27.3% in 2017 vs. 27.5% in 2014
- Sk Telecom has high CAPEX intensity: 5 year average CAPEX/Revenue was 15.7%. At the same time it's a lot of higher than industry average of 10.6%.
- CAPEX is quite volatile: 597,125 KRWm in 2018, 883,863 KRWm in 2017, 1,206,957 KRWm in 2016, 1,094,939 KRWm in 2015, 1,863,149 KRWm in 2014
- The company has potentially unprofitable business model: ROIC is 3.9%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.9x while industry average is -0.3x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased on 3.7%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 0.72 pp from 27.3% to 26.6% in 2018.
Gross Margin showed almost no change in 2018. SG&A as a % of Revenue increased slightly on 0.85 pp from 60.3% to 61.2% in 2018.
Net Income margin increased on 3.7 pp from 14.8% to 18.5% in 2018. During the last 5 years Net Income margin bottomed in 2015 at 8.9% and was growing since that time.
Investments (CAPEX, working capital and M&A)
Sk Telecom's CAPEX/Revenue was 16.5% in 2018. The company's CAPEX/Revenue increased on 2.1 pp from 14.5% in 2015 to 16.5% in 2018. Average CAPEX/Revenue for the last three years was 15.5%. Sk Telecom invested a big chunk of EBITDA (62.2%) to CAPEX which didn't stop revenue from falling. During the last 5 years CAPEX as a % of Revenue bottomed in 2015 at 14.5% and was growing since that time.
Return on investment
The company operates at good ROE (15.4%) while ROIC is low (3.9%). ROIC decreased on 2.0 pp from 5.9% to 3.9% in 2018. ROE showed almost no change in 2018. ROIC followed a declining trend at -1.0 pp per annum in the last 5 years. During 2014-2018 ROE bottomed in 2015 at 10.1% and was growing since that time.
Leverage (Debt)
Debt level is 1.9x Net Debt / EBITDA and 2.2x Debt / EBITDA. Net Debt / EBITDA jumped on 0.6x from 1.3x to 1.9x in 2018. Debt jumped on 29.7% while cash increased on 3.4%.
Sk Telecom has no short term refinancing risk: cash is higher than short term debt (101.2%).
Management team
Park Jung-Ho is a Sk Telecom's CEO. Park Jung-Ho is a founder and has spent 2 years with the company.
Financial and operational results
FY ended 31 Dec 2018
Sk Telecom ($SKMD) key annual financial indicators| mln. KRW | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 17,163,798 | 17,136,734 | 17,091,816 | 17,520,013 | 16,873,960 | -3.7% |
| Gross Profit | 15,483,688 | 15,180,873 | 15,253,448 | 15,633,489 | 15,077,814 | -3.6% |
| SG&A | 10,507,156 | 10,251,332 | 10,393,211 | 10,569,537 | 10,324,050 | -2.3% |
| EBITDA | 4,716,975 | 4,701,492 | 4,604,302 | 4,784,145 | 4,486,099 | -6.2% |
| Net Income | 1,801,180 | 1,518,600 | 1,675,970 | 2,599,830 | 3,127,890 | 20.3% |
Balance Sheet
|
|---|
| Cash | 834,429 | 768,922 | 1,505,242 | 1,457,735 | 1,506,699 | 3.4% |
| Short Term Debt | 961,118 | 1,083,298 | 1,192,854 | 1,963,651 | 1,488,515 | -24.2% |
| Long Term Debt | 5,798,904 | 6,560,700 | 6,478,646 | 5,808,056 | 8,587,576 | 47.9% |
Cash flow
|
|---|
| Capex | 3,008,026 | 2,478,778 | 2,490,455 | 2,715,859 | 2,792,390 | 2.8% |
Ratios
|
|---|
| Revenue growth | 3.4% | -0.2% | -0.3% | 2.5% | -3.7% | |
| EBITDA growth | -2.6% | -0.3% | -2.1% | 3.9% | -6.2% | |
|
|---|
| Gross Margin | 90.2% | 88.6% | 89.2% | 89.2% | 89.4% | 0.1% |
| EBITDA Margin | 27.5% | 27.4% | 26.9% | 27.3% | 26.6% | -0.7% |
| SG&A, % of revenue | 61.2% | 59.8% | 60.8% | 60.3% | 61.2% | 0.9% |
| Net Income Margin | 10.5% | 8.9% | 9.8% | 14.8% | 18.5% | 3.7% |
| CAPEX, % of revenue | 17.5% | 14.5% | 14.6% | 15.5% | 16.5% | 1.0% |
|
|---|
| ROIC | 8.3% | 7.3% | 6.3% | 5.9% | 3.9% | -2.0% |
| ROE | 12.8% | 10.1% | 10.6% | 15.3% | 15.4% | 0.2% |
| Net Debt/EBITDA | 1.3x | 1.5x | 1.3x | 1.3x | 1.9x | 0.6x |
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 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Orascom Telecom Media&Tech Hldg Sae ($OTMT) | -89.4% | 12.8% | 84.7% | 190.0% | |
| Megafon OJSC ($MFON) | | -0.4% | 0.9% | 18.0% | |
| Global Telecom Hldg Sae ($GLTD) | | -13.3% | 2.1% | 2.0% | |
| Sistema Jsfc ($SSAA) | | 10.6% | -1.5% | 1.0% | |
| Kcell JSC ($KCEL) | -0.0% | -10.2% | -12.7% | 0.1% | |
| |
|---|
| Median (6 companies) | 11.9% | -3.1% | -0.3% | 1.5% | -46.5% |
|---|
| Sk Telecom ($SKMD) | | -0.2% | -0.3% | 2.5% | -3.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Megafon OJSC ($MFON) | 73.1% | 73.1% | 69.9% | 70.7% | |
| Sistema Jsfc ($SSAA) | 50.4% | 46.7% | 49.9% | 52.0% | |
| Orascom Telecom Media&Tech Hldg Sae ($OTMT) | 80.0% | 31.5% | 42.5% | 43.9% | |
| Kcell JSC ($KCEL) | 55.1% | 46.6% | 37.5% | 38.8% | |
| Mobile Streams ($MOS) | 29.3% | 26.4% | 27.6% | 30.8% | 38.7% |
| |
|---|
| Median (5 companies) | 60.0% | 46.7% | 46.2% | 43.9% | 38.7% |
|---|
| Sk Telecom ($SKMD) | 90.2% | 88.6% | 89.2% | 89.2% | 89.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Global Telecom Hldg Sae ($GLTD) | 42.8% | 43.9% | 40.3% | 41.2% | |
| Megafon OJSC ($MFON) | 43.5% | 41.9% | 37.0% | 36.1% | |
| Sistema Jsfc ($SSAA) | 23.9% | 22.5% | 25.4% | 26.2% | |
| Orascom Telecom Media&Tech Hldg Sae ($OTMT) | 785.3% | -8.4% | -25.5% | 24.6% | |
| Mobile Streams ($MOS) | 0.8% | 2.9% | -6.2% | -28.0% | -38.7% |
| |
|---|
| Median (5 companies) | 33.3% | 31.3% | 9.6% | 26.2% | -38.7% |
|---|
| Sk Telecom ($SKMD) | 27.5% | 27.4% | 26.9% | 27.3% | 26.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Global Telecom Hldg Sae ($GLTD) | 36.5% | 26.2% | 18.3% | 29.5% | |
| Orascom Telecom Media&Tech Hldg Sae ($OTMT) | 82.4% | 56.3% | 53.5% | 19.4% | |
| Megafon OJSC ($MFON) | 18.5% | 20.1% | 18.3% | 16.5% | |
| Kcell JSC ($KCEL) | 9.6% | 9.5% | 10.3% | 15.3% | |
| Sistema Jsfc ($SSAA) | 14.2% | 15.0% | 12.9% | 11.1% | |
| |
|---|
| Median (6 companies) | 11.9% | 12.3% | 11.6% | 15.9% | 0.6% |
|---|
| Sk Telecom ($SKMD) | 17.5% | 14.5% | 14.6% | 15.5% | 16.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Kcell JSC ($KCEL) | 62.9% | 40.2% | 21.8% | 21.2% | |
| Global Telecom Hldg Sae ($GLTD) | 17.4% | 14.7% | 17.9% | 20.7% | |
| Megafon OJSC ($MFON) | 23.7% | 19.6% | 14.8% | 14.2% | |
| Sistema Jsfc ($SSAA) | 8.3% | 7.4% | 8.6% | 11.0% | |
| Orascom Telecom Media&Tech Hldg Sae ($OTMT) | 17.1% | -9.7% | -3.4% | 1.8% | |
| |
|---|
| Median (7 companies) | 17.3% | 17.2% | 2.6% | 11.0% | -117.8% |
|---|
| Sk Telecom ($SKMD) | 8.3% | 7.3% | 6.3% | 5.9% | 3.9% |
Top companies by Net Debt / EBITDA
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Sistema Jsfc ($SSAA) | 2.7x | 3.5x | 3.0x | 3.2x | |
| Global Telecom Hldg Sae ($GLTD) | 2.0x | 1.6x | 2.0x | 2.2x | |
| Megafon OJSC ($MFON) | 1.4x | 1.5x | 1.7x | 1.7x | |
| Orascom Telecom Media&Tech Hldg Sae ($OTMT) | -0.4x | | | -2.5x | |
| |
|---|
| Median (4 companies) | 0.1x | 0.2x | 1.9x | 1.9x | |
|---|
| Sk Telecom ($SKMD) | 1.3x | 1.5x | 1.3x | 1.3x | 1.9x |
