SK hynix Eyes Bigger Shareholder Returns

Headquarters of SK hynix. (Yonhap) With SK hynix suspending its review of an initial public offering (IPO) for its sub-subsidiary Solidigm, attention is focused on the additional shareholder return cards to be announced on Oct. 28. As SK hynix emphasized the enhancement of shareholder value while halting the review of the Solidigm IPO, the market expects a shareholder return policy that exceeds expectations to emerge. According to the industry on Oct. 26, SK hynix will disclose an additional shareholder return plan along with its third-quarter earnings announcement on October 28. Forecasts from the stock market suggest that SK hynix will break its record for the highest earnings once again, following the previous quarter. According to financial information provider FnGuide, the consensus (average estimate by securities firms) for SK hynix’s third-quarter earnings is 98.2257 trillion won (about $74.24 billion) in sales and 76.964 trillion won in operating profit. If SK hynix’s third-quarter operating profit exceeds 70 trillion won, it will achieve its highest earnings on record for six consecutive quarters. Market attention is focused on the additional shareholder return card to be disclosed along with the earnings announcement. SK hynix announced a plan in August to acquire and cancel treasury shares worth 40 trillion won, stating that it would pursue additional shareholder returns. In particular, as SK hynix emphasized the enhancement of shareholder value while suspending the review of the Solidigm IPO, expectations are rising that a shareholder return policy exceeding expectations will emerge. “The withdrawal of the Solidigm IPO likely further highlighted the importance of a shareholder return policy that directly reverts to existing shareholders,” Meritz Securities analyst Kim Sun-woo expected, adding, “There is a high possibility that an enhanced shareholder return plan exceeding existing expectations will be presented at this earnings presentation.” The financial resources for shareholder returns expected by the market based on free cash flow (FCF) are at least 30 trillion won. It is forecast that weight will be placed on the purchase and cancellation of treasury shares rather than dividends. SK hynix also excluded the expansion of dividends from the shareholder return plan announced in August. Some analysts also suggest that the proceeds from the sale of its stake in Japan’s Kioxia, which it invested in in 2018, will be utilized as financial resources for a special dividend. However, SK hynix stated through a clarification disclosure, “We are reviewing various shareholder return plans to enhance shareholder value, but nothing has been confirmed as of now.”