'Activist' Align Bets on SK: 100 Trillion Won in Value, 25 Trillion Won Market Cap [fn Market Watch]

[Financial News]  The activist fund Align Partners Asset Management disclosed for the first time that it holds a 1.5% stake in SK, highlighting the company's undervaluation. This reflects its view that improved performance at SK hynix is not being sufficiently reflected in the corporate value of SK, the group's top holding company. With SK's corporate value enhancement plan (value-up plan), scheduled for this year, approaching, narrowing the holding-company discount is expected to emerge as a new issue.
According to investment banking (IB) industry sources on the 21st, Lee Chang-hwan, CEO of Align Partners, presented SK as an investment idea at the '13D Monitor Active-Passive Investor Summit' held in New York on the 20th (local time). Funds managed or advised by Align hold about 1.5% of SK.
What drew Align's attention was the SK Group's multilayered ownership structure. SK holds a 32.2% stake in SK Square, while SK Square holds about 20% of SK hynix. The analysis is that SK hynix's corporate value is discounted twice as it passes through SK Square and SK Inc.
Align calculated SK's net asset value (NAV) at about 100 trillion won. By contrast, its market capitalization stood at 24.9 trillion won as of the 16th, implying a discount of 75%. Align estimated the discount based on net investment assets—excluding assets related to its own businesses and other such assets—at 91.4%. These figures, however, reflect Align's valuation methodology.
Share-price trends among the group's listed holding companies also diverged.
According to Align, SK Square's share price rose 746% from October 2024 onward, while SK's rose just 204%. SK Square's introduction of a target for narrowing its NAV discount, share buybacks and cancellations, and improvements to its executive compensation system were cited as points of comparison.
The key issue is SK's value-up plan, which it is set to announce this year. Align believes SK should set out a specific NAV discount target and measures to achieve it, as SK Square has done. However, no formal shareholder proposal or public demand related to management control at SK Inc. has been announced so far.
IB industry sources are watching to see whether this announcement could lead beyond the disclosure of a simple investment idea to discussion of SK's capital-allocation policy and level of shareholder returns. Whether SK can apply SK Square's experience in narrowing its discount is seen as a key variable.
An IB industry source said, “Improved performance at SK hynix and a rise in the holding company's share price are separate issues. To reduce the holding-company discount, it is important to spell out treasury-share policies and capital-allocation principles rather than make declarative value-up pledges.”
Another IB industry source also noted, “It stands out that Align's disclosure of its stake came ahead of SK's value-up announcement this year. This may be a strategic investment aimed at narrowing the holding-company discount rather than simply investing in an undervalued company. Going forward, concrete capital-allocation measures such as treasury-share cancellations, dividend policy, and the disposal of non-core assets are expected to be key to a reassessment of corporate value.” 


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