Sands Capital Management, LLC - Emerging Markets Growth Composite on SK Square Co., Ltd.
Thesis
SK Square is a holding-company investment whose net asset value is overwhelmingly tied to its stake in SK hynix. Sands sees it as an attractive way to gain economic exposure to SK hynix while adding a second source of potential return from corporate actions and discount compression. Management has been divesting non-core assets, simplifying the portfolio and repurchasing shares, with an objective of materially narrowing the holding-company discount. If SK hynix continues to compound while SK Square's discount narrows, shareholders can benefit from both underlying earnings growth and improved valuation. The fund completed the purchase during the quarter as part of its broader AI and semiconductor positioning.
“In our view, SK Square is an attractive way to gain economic exposure to SK hynix, with additional return potential from ongoing buybacks, asset simplification, and a narrowing holding company discount.”
Key risks
- The investment is highly concentrated in the value of SK hynix
- The holding-company discount may not narrow as expected