MyData Review Gradually Accelerates
Digital Insurance Company Expected to Be Established Within the Year
[Asia Economy Reporter Kiho Sung] Kakao Pay is accelerating its business expansion ahead of its listing. Progress is being made on the long-awaited personal credit information management (MyData) business license, and preparations are underway for the preliminary approval review to establish a digital non-life insurance company. Expectations for Kakao Pay's year-end initial public offering (IPO), which has entered the listing process, are also rising.
According to the financial sector on the 1st, the previously stalled Kakao Pay MyData business review is reportedly making progress. Kakao Pay applied for the MyData preliminary approval review last December, but encountered obstacles due to issues regarding the major shareholder eligibility of Alipay Singapore Holding, an Ant Group affiliate holding 43.9% of shares. At that time, financial authorities sent a letter to the People's Bank of China to inquire whether Alipay had been subject to any legal sanctions by the authorities, but received no response, leading to a decision to suspend the review. Recently, the Financial Services Commission and the Financial Supervisory Service have been engaging with Chinese authorities through various channels.
Once the major shareholder eligibility issue is resolved, Kakao Pay is expected to resume MyData-related services promptly. The MyData review period consists of a two-month preliminary review and a one-month main review, but if all facility and personnel requirements are met, the process can proceed directly to the main review and be completed within one month. Additionally, financial authorities have announced that they will accept MyData review applications monthly, so with the major shareholder eligibility issue resolved, services could resume within a maximum of three months.
Preparations are also underway for the launch of an insurance company. Kakao Pay plans to launch the first digital non-life insurance company combining ICT and insurance, a big tech (large information and communication company), as early as the end of this year. Previously, Kakao Pay attempted to establish a digital non-life insurance company jointly with Samsung Fire & Marine Insurance in 2019, but the plan fell through due to differing opinions. Subsequently, Kakao Pay applied for a preliminary license for a comprehensive non-life insurance company last December and has since pursued an independent path toward establishing a digital non-life insurer. Industry insiders believe that if Kakao Pay’s insurance license proceeds smoothly, the digital non-life insurance company could launch within this year.
Market Value Over 10 Trillion Won... Growing Expectations for IPO
The listing process is also progressing smoothly. On the 26th of last month, Kakao Pay submitted a preliminary listing review application to the Korea Exchange’s KOSPI Market Headquarters. Considering that the preliminary review period typically takes about two months, Kakao Pay is expected to pass the review and enter the IPO process as early as the end of June. The lead underwriter is Samsung Securities.
As the platform grows, the revenue structure has also greatly improved, and securities firms expect Kakao Pay to achieve profitability this year. Kakao Pay’s revenue has rapidly increased from 10.6 billion won in its first year after spin-off in 2017, to 69.5 billion won in 2018, 141.1 billion won in 2019, and 284.4 billion won in 2020. This represents more than double the previous year and a 27-fold increase compared to the first year after spin-off. Conversely, operating losses have rapidly decreased from a 96.5 billion won deficit in 2018, when significant investments began, to 65.1 billion won in 2019 and 17.9 billion won in 2020. The net loss in 2020 was 25 billion won, improving by about 62% compared to the previous year.
Internally, Kakao Pay values the company at up to 17 trillion won at the time of listing. According to the securities industry, Kakao Pay’s preliminary listing review application revealed the planned public offering amount and desired offering price. Currently, the underwriters have requested corrections, and the related information has been removed.
According to the disclosed information, the issue price per share ranges from 73,700 to 96,300 won, with the planned public offering amount between 1.474 trillion and 1.926 trillion won. The number of shares to be listed is 133,367,125, and the market capitalization immediately after listing is estimated between 9.829 trillion and 12.843 trillion won. Considering that the public offering price is typically calculated with a 20-40% discount, the company value Kakao Pay envisions reaches up to 17 trillion won.
In the market, even with conservative estimates, given the current trend where mega IPOs often set their offering price above the upper limit, the consensus is that Kakao Pay will be recognized with a corporate value exceeding 13 trillion won. This surpasses the market capitalization of Hana Financial Group, which stood at 13 trillion won as of the 28th.
Initially, securities firms projected Kakao Pay’s expected corporate value could reach up to 18 trillion won. Recently, Jonghwa Sung, a researcher at Ebest Securities, forecasted that Kakao Pay would structurally break even on operating profit this year and valued the company at 18 trillion won by applying a multiple of 0.18 to the expected transaction volume of 100 trillion won in 2021.
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