On SK Telecom’s key decision of spinning off a new investment company, market watchers have painted a rosy outlook for South Korea’s top wireless carrier on Thursday.

“The spinoff plan will boost (SK Telecom’s) corporate value. Under the spinoff to a telecom-focused investment holding firm with stable cash flow and dividends, its affiliated companies that were undervalued will likely be reevaluated,” said Ahn Jae-min, an analyst at NH Investment & Securities.

Yuanta Securities Korea’s analyst Choi Nam-gon forecast SK Telecom’s market capitalization to increase naturally after the spinoff, although the company’s approximately 30 trillion won ($26.9 billion) in assets have been undervalued so far.

“Since the spinoff plan makes (the wireless carrier) an attractive investment destination, the speed of share price rises will be much faster backed by institutional investors’ eased net sales and foreign investors’ strong buying spree.”

SK Telecom’s board of directors approved the spinoff plan, dividing its shares by six to four between its telecom-focused entity and the new investment firm, tentatively named SKT Investment, on Nov. 1, according to its regulatory filing.

The company also decided to conduct a 5-to-1 stock split, which will increase the number of its shares to about 360 million from 72 million. The latest decision came to improve shareholders value, the wireless carrier explained.

The final approval for the spinoff and stock split is set to be granted at the upcoming shareholders’ meeting on Oct. 12. Following the timetable, the shares will suspend trading on the main bourse Kospi for a month from Oct. 26.

While market experts including Hanwha Investment & Securities analyst Lee Soon-hak suggested investors hold SK Telecom shares at least until this fall in line with the firm’s initial approval, the stock gained momentum during Thursday’s trading session. The shares hit a 52-week high of 339,500 won in early morning trade.

By Jie Ye-eun (yeeun@heraldcorp.com)