Kakao Group Aims for Top Market Cap Competition with Pay and Bank Services

Kakao Pay and Kakao Bank Debut with Double First-Day Gains
Surpassing Market Caps of LG and Hyundai Motor Group

However, Securities Analysts Predict Challenges Due to High Expected IPO Prices

[Asia Economy Reporter Minji Lee] Kakao Group, ranked 5th in market capitalization among listed conglomerates, is drawing attention as to whether it can challenge the 3rd place in group market cap with the IPOs of its subsidiaries Kakao Pay and Kakao Bank.

According to financial information firm FnGuide on the 16th, as of the 14th, the market capitalization of the listed Kakao Group (Kakao, Neptune, Kakao Games) stands at approximately KRW 78.85 trillion. This ranks 5th among domestic conglomerates on the same day. Looking at the market cap sizes of domestic conglomerates, Samsung Group leads with KRW 688.3893 trillion, followed by SK Group (KRW 214.2716 trillion), LG Group (after LX Group separation, KRW 149.4371 trillion), Hyundai Motor Group (KRW 142.6494 trillion), and POSCO Group (KRW 47.5283 trillion).

With Kakao’s subsidiaries Kakao Bank and Kakao Pay scheduled for subscription in July and August respectively, if they debut on the stock market with a "ttasang" (a term referring to the stock price opening at double the IPO price and then hitting the upper limit), they are expected to surpass the market caps of major conglomerates. Kakao Bank, with general subscription scheduled for the 26th and 27th, has a hoped-for IPO price range of KRW 33,000 to KRW 39,000, which translates to a market cap of up to KRW 18.53 trillion. Assuming a ttasang, the stock price on the listing day would be KRW 101,400, increasing Kakao Bank’s market cap to approximately KRW 48.18 trillion. Kakao Pay, with subscription dates on the 4th and 5th of next month and a hoped-for IPO price range of KRW 63,000 to KRW 96,000, has a market cap of KRW 12.5152 trillion. Assuming a ttasang, the listing day stock price would be KRW 249,600, expanding its market cap to KRW 32.54 trillion.

If both companies succeed in achieving ttasang, Kakao Group’s market capitalization would grow to KRW 160 trillion, surpassing the market caps of LG Group and Hyundai Motor Group. As large-scale IPOs enter the market, heating up the public offering market, Kakao Group’s aggressive growth strategy is expected to stimulate profitability and expand investor sentiment.

However, some analysts suggest that the hoped-for IPO prices of Kakao Bank and Kakao Pay are set high, making it difficult to reach ttasang. SK Securities predicts Kakao Bank’s post-IPO market cap at KRW 31 trillion, assuming a post-listing stock price of KRW 64,000. Researcher Taejun Jeong of Yuanta Securities commented on Kakao Bank, saying, "There is doubt about the selection of comparable companies with high price-to-book ratios, as some chosen companies lack similarity. The stock price rise was driven by expectations that Kakao Bank would become the number one in loan market share, but over time, concerns that these expectations were excessive have grown, which will negatively impact the stock price."

Meanwhile, based on operating profit, Kakao Group’s profit level falls short compared to the top 10 conglomerates. Kakao Group’s first-quarter profit, including Kakao Pay and Kakao Bank, was KRW 240 billion, which is less than that of Shinsegae (KRW 273.2 billion) and Hyundai Heavy Industries Group (KRW 716.5 billion), which have lower market cap rankings.