[Click eStock] "Kakao's Future Growth Potential Increases with Subsidiary IPO"

Various Subsidiaries Including KakaoBank and KakaoPay Expected to Proceed with IPOs This Year
Acquisition of eBay Korea Anticipated to Positively Impact Not Only E-commerce but Also Advertising Rates

[Asia Economy Reporter Gong Byung-sun] Amid speculation about the possibility of initial public offerings (IPOs) by Kakao's subsidiaries this year, an analysis suggests that their future growth potential will increase further based on loyal customers. If the subsidiaries succeed in going public, the platform value of the parent company is also expected to rise. Accordingly, IBK Investment & Securities has raised the target price for Kakao from the previous 540,000 KRW to 560,000 KRW, maintaining a 'Buy' rating.

This year, various Kakao subsidiaries such as Bank, Pay, Entertainment, and Education are expected to proceed with IPOs. Kakao Games, which was listed on KOSDAQ last year, started at an offering price of 24,000 KRW and formed an opening price double the offering price on the first day, followed by a limit-up, known as a 'ttasang', rising to 81,000 KRW. Moreover, the subsidiaries have secured over ten million loyal customers, and according to Lee Seung-hoon, a researcher at IBK Investment & Securities, their future growth potential is higher than short-term performance. As a result, the value of shares is expected to be highlighted each time a subsidiary goes public.

If the subsidiaries succeed in going public, it is anticipated that the parent company will also benefit. This is because the platform value of the parent company, including KakaoTalk, Commerce, Melon, and KakaoTV, is expected to grow further. The researcher said, “As Kakao's e-commerce transaction volume increases, it will lead to a rise in the unit price of KakaoTalk advertising products,” adding, “Once Kakao Entertainment's video content is actively produced and distributed, significant revenue growth for KakaoTV and Melon is also expected.”

The news of acquiring eBay Korea is also a positive factor for Kakao. eBay Korea operates Gmarket, Auction, and G9, and is considered an essential piece to dominate the domestic e-commerce market. Consequently, not only Kakao but also Shinsegae, Lotte, and GS Retail are competing for eBay Korea. The researcher predicted, “If Kakao acquires eBay Korea, it will not only increase e-commerce transaction amounts but also raise KakaoTalk advertising unit prices.” In fact, in the case of Naver, traffic flows from search ads to Smart Store, creating commerce synergy.

Accordingly, IBK Investment & Securities raised the target price considering the appropriate value of 49.6 trillion KRW, which includes the parent company's advertising business value of 25 trillion KRW, the subsidiaries' equity value of 21 trillion KRW, and net debt. The fact that subsidiaries such as Mobility and Enterprise are attracting investments at higher valuations and that the approaching IPOs are increasing the subsidiaries' value also positively influenced the evaluation.