Investor Briefing. SK infosec Acquisition. SK Telecom

Transcription

1 infosec Acquisition Telecom

2 Disclaimer This presentation contains forward-looking statements with respect to the results of operations and business of Telecom (the Company ) and plans and objectives of the management of the Company. The aforementioned forward looking statements are influenced by unknown risks, uncertainties and other factors which may change the actual results or performance of the Company. The Company does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this management presentation, and nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Therefore, this presentation contained herein should not be utilized for any legal purposes in regards to investors investment results. The Company hereby expressly disclaims any and all liability for any loss or damage resulting from the investors reliance on the information contained herein. This presentation only speaks the information as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. 1

3 Contents Highlights 3 Acquisition Structure 4 Snapshot of infosec 5 Rationale 7 [Appendix] Condensed Financials of infosec 8 2

4 Highlights In addition to recent acquisition of ADT Caps, Telecom decides to purchase infosec to further concentrate security business expertise 100% of infosec stake to be purchased with 1.6% treasury shares of Telecom through a stock swap transaction infosec enterprise value is KRW bn 1, with 9.6x EV/EBITDA Stock swap ratio is T(@ KRW 279,088) : infosec(@ KRW 27,844) = 1 : KRW 351.8bn equity value less KRW 84.5bn cash As the leader of the growing domestic information security market, infosec generates stable earnings and maintains a healthy balance sheet Domestic information security market size estimated to reach KRW 3.8tn by 20 from KRW 2.7tn in 17 with a growth rate of 12.4% Stable sales growth leads to operating margin level of 10% and above The company has over KRW 80bn in net cash and a healthy financial structure The security business arm of Telecom aims to generate KRW 1.6tn in sales by 20, integrating information-physical security services to create unparalleled convergence security offering As the significance of information security increases and convergence across industries proliferate, the market for convergence security is expected to continue on its upward trajectory 3

5 Acquisition Structure Telecom will engage in a stock swap offering 1.6% treasury shares to acquire 100% of infosec BoD Approval on Oct 25th, Stock swap singing on Oct 31th, Closing on End of Dec As-is After the Stock Swap Corporation 25.2% 100% Treasury shares Corporation 26.8% (+1.6%) T infosec 1.6% T infosec 100% infosec 100% subsidiary infosec enterprise value is KRW 267.3bn 1, 9.6x EV/EBITDA Acquisition price is calculated in accordance with relevant regulations; Telecom applied the arithmetic mean of the most recent 1 month/1 week/prior date closing prices whereas infosec applied its intrinsic value Stock swap ratio is T(@ KRW 279,088) : infosec(@ KRW 27,844) = 1 : ,260,668 treasury shares(1.6%), BOD approval date is the reference date 10/25 1 KRW 351.8bn equity value less KRW 84.5bn cash Telecom Valuation a 1 month average closing price b 1 week average closing price c Prior date closing price Reference price [(a+b+c)/3] KRW 277,377 KRW 281,387 KRW 278,500 KRW 279,088 infosec Asset Value x 40% Earnings Value x 60% Intrinsic Value KRW 351.8bn 4

6 Snapshot of infosec 1. infosec infosec is #1 domestic information security company With the extended awareness of corporations on information security and strengthened regulatory measures regarding personal information, the domestic information security market is expected to grow 12.4% by 20 Domestic Information Security Market Sales of Domestic Peer Group ( 17) (KRW tn) % '15 '16 '17 '20E (Source: Korea Information Security Industry Association) infosec Ahnlab SECUI WINS IGLOO SGA Security Solutions Stable profit generation with sound financial structure Constant sales increase due to its technological capability and customers base with high retention ratio Heathy financial structure with over KRW 80bn in net cash Sales and Operating Margin % Sales 11% % OPM(%) % '13 '14 '15 '16 '17 11% *Temporary fall on profit in 16 due to the increase in R&D expenses after the profit hike from the merger with Vizen in 15 Balance Sheet (KRW: bn) 17 Current assets Cash and marketable securities 84.5 Non-current assets 26.9 Total assets Current liabilities 47.3 Non-current liabilities 3.7 Total liabilities 51.0 Common stock 6.3 Total shareholders equity Debt to Equity ratio 40.3% 5

7 Snapshot of infosec 2. Business Segments infosec operates in four different segments of Managed Security Service (MSS), Solution, Consulting, Customer IT Service MSS: Provides intrusion prevention service in case of information security threat - Profit improvement through conversion to Remote MSS from On-premise MSS Solution: Conducts design & build, and sales of security solutions - Increase in customer base due to the growth of ICT industries (cryptocurrency exchange, internet banks, etc) Consulting: Provides diagnosis and compliance guidance regarding information security - Increase in demand expected due to the extended awareness of corporates on information security and strengthened regulatory pressure on personal information Customer IT Service: Operates call center and on-site help desk - Expected to grow with the progression of other business segments Sales by Business Segment [MSS] [Solution] % % 69.0 '15 '17 '15 '17 [Consulting] [Customer IT Service] % % 50.0 '15 '17 '15 '17 6

8 Rationale Targeting sales of security business arm to KRW 1.6tn by 20 through integration of information-physical security service 2014 Acquisition of NSOK Acquisition of ADT Caps Entrance to physical security market Pursued qualitative and quantitative enhancement of physical security business - Procured nation wide customer base and profitability Established foundation for new Business Model, integrating T s New ICT capabilities - Next generation security solution, Facility Mgmt., Unmanned parking lot/convenience store, etc. Internalized information security capabilities which will become the core competency in B2B/IoT business Acquisition of infosec Synergy through integration of information-physical security business - Full fledged entrance to smart video security market T Video Security Solutions Trespass sensing ADT Caps SMB sales channel, Security personnel Access control and dispatch infosec Monitoring System Network control 2020 Concentrate security business capability to prepare upcoming convergence security era Quantum leap to solid leading position in security market 7

9 [Appendix] Condensed Financials of infosec - Financial Statements Current assets Cash and marketable securities Account receivable Other current assets Non-current assets Tangible assets Intangible assets Other non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Common stock Capital surplus Retained earnings Total shareholder s equity Total liabilities and shareholders equity * Cash and marketable securities includes short-term financial instruments - Income Statements Sales Operating expenses Operating income Net profit or loss from nonoperating items Income before tax Corporate tax Net income