[Click eStock] "Naver, Full-Scale Entry into Japan's Internet Market Four Times Larger than Korea"

From E-commerce to Search and Fintech... Japan Leads Digital Transformation
This Year Strengthening M&A and Various External Collaborations... "Reevaluated as a Global Platform Company"

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Naver's Japanese subsidiary Line and Yahoo Japan have completed their merger. The integration of Japan's national messenger (Line) and national search portal (Yahoo Japan) is expected to aggressively target the Japanese search and e-commerce market, which is more than four times larger than the domestic market. Accordingly, Naver is also expected to be re-evaluated as a global platform company.

According to the industry on the 2nd, the newly established 'Z Holdings Group (ZHD Group)', formed by the business integration of Naver's Japanese subsidiary Line and Z Holdings, a SoftBank subsidiary operating Yahoo Japan, was launched in Japan yesterday. Along with this, Naver and SoftBank also launched the holding company A Holdings, which owns 65% of Z Holdings' shares. Both companies hold 50% of A Holdings' shares each.

Accordingly, Naver plans to launch 'Naver Smart Store' in Japan in the first half of the year in collaboration with Line and Yahoo Japan. Following this, they aim to lead digital transformation across all sectors in Japan, including e-commerce, fintech (finance + technology), and public sectors. Lee Seunghoon, a researcher at IBK Investment & Securities, said, "Z Holdings has secured 100% of the shares of Line and Yahoo Japan and has more than 100 million monthly users in Japan." He added, "In the future, if AI-based search engines, Smart Store, and tech-fin platforms are combined with Yahoo Japan, they will have a competitive advantage in the search and e-commerce sectors, which are more than four times larger than the domestic market."

Naver is expected to actively expand its domestic and international businesses such as content and e-commerce through mergers and acquisitions (M&A) and external cooperation. In January, it already acquired shares in the world's largest web novel platform 'Wattpad' and BNX, a subsidiary of Big Hit Entertainment, the agency of idol group BTS, which operates the idol content platform Weverse. This is expected to create a virtuous cycle by attracting global users who enjoy K-content to the Naver platform.

Meanwhile, Naver is securing a competitive edge in e-commerce through cooperation with logistics and distribution companies such as CJ Logistics and Shinsegae. The researcher explained, "Based on AI prediction technology, the same-day delivery system with CJ Logistics has been advanced, and collaboration between online and offline with Shinsegae has become more likely." He interpreted this as "After COVID-19, the domestic e-commerce market has deepened into a duopoly between Naver and Coupang, focusing on strengthening the essential functions of e-commerce."

Against this backdrop, IBK Investment & Securities maintained a 'Buy' rating on Naver and raised the target price to 500,000 KRW. The previous closing price was 375,000 KRW. The target price was calculated by summing the portal division and the equity value of the Z Holdings integrated corporation at 63 trillion KRW and 16 trillion KRW, respectively. The researcher explained, "The portal division's market dominance in the global content sector has been strengthened after M&A, and the e-commerce division's value has increased due to the Coupang listing issue." He added, "Since platform businesses are showing visible results beyond Korea, Japan, and Southeast Asia to Western regions, a re-evaluation as a global platform company is expected."