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The author is an analyst of NH Investment & Securities. He can be reached at — Ed. 

The competitive power of SkyLife’s Channel ENA is set to strengthen notably in line with the success of hit drama Extraordinary Attorney Woo. Also boding well, a downtrend in the numbers of satellite broadcasting and CATV subscribers looks to be calming down thanks to high-speed Internet resales.

Shares undervalued; evolving into comprehensive media player

– We maintain a Buy rating and a TP of W12,000 on SkyLife. The competitive power of the company’s Channel ENA is set to strengthen notably in line with the success of hit drama Extraordinary Attorney Woo. Moving ahead, channel attractiveness and accompanying advertising sales look well situated to grow. Rather than just being a satellite broadcasting business providing only broadcasting lines, we believe that SkyLife is evolving into being a comprehensive media player producing and distributing content. Also boding well, SkyLife’s core satellite broadcasting business is making up for a decline in subscriber numbers through both the acquisition of cable broadcasting player HCN and the high-speed Internet resales.

– SkyLife’s shares are currently trading at a 2022E P/E of only 6.7x, receiving a heavy valuation discount due to both the limitations of satellite broadcasting and a drop in subscriber numbers. Versus both competitor LG Hello Vision and rival telecommunication companies, we view SkyLife’s shares as being excessively undervalued. Particularly given that the competitiveness of its content business is expanding, and further given that concerns towards its satellite broadcasting business are gradually decreasing thanks to high-speed Internet resales, we believe that SkyLife’s share price is being primed for a recovery.

– We view the competitiveness of Channel ENA (operated by subsidiary SkyLife TV) as being confirmed through the popularity of Extraordinary Attorney Woo. In 2H22, the channel’s advertising sales should expand via a number of planned new content offerings, including Good Job!, Recruit, a follow-up show to I am Solo, and a new celebrity camping show.

2Q22 review: OP meets expectations

– On a consolidated basis, SkyLife announced 2Q22 sales of W254.2bn (+45.2% y-y, +5.6% q-q) and OP of W23.3bn (+0.4% y-y, -9.6% q-q), with OP meeting both our estimate of W24.1bn and consensus of W24.4bn. Telecom service sales (W33.0bn, +139.0% y-y) rose in response to the strengthened competitiveness of the company’s combined mobile and high-speed Internet product offerings. And, advertising sales (W13.7bn, +90.3% y-y) climbed sharply alongside the success of Extraordinary Attorney Woo. We foresee further robust advertising and content sales performance in 3Q22.


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