[Into the Stocks] Fintech Leading Company Kukon... Expanding with MyData

Operating Profit Margin of Data Service Sector Exceeds 40% in Q2 This Year
Mandatory Implementation of MyData Standard API in January Next Year...Expected Benefits Amid Intensifying Competition

[Asia Economy Reporter Gong Byung-sun] Kukon is growing thanks to the high profitability of its data services division. It is expected to solidify its position as a leading fintech company if it continues to succeed in the MyData sector in the future.

According to the electronic disclosure system on the 24th, Kukon's second-quarter sales reached 15.5 billion KRW, up 29.7% year-on-year, and operating profit increased by 42.7% to 4.2 billion KRW. This marks the highest quarterly sales since its initial public offering (IPO).

Kukon already attracted significant interest from investors at its IPO on April 28. The competition rate for the general subscription was 1,596.35 to 1, with subscription deposits totaling 14.5 trillion KRW. This is a substantial amount compared to Krafton's subscription deposits of 5.0358 trillion KRW, which recently failed to attract attention despite being a major game stock.

(Source=Eugene Investment & Securities)

Kukon's core business, which has drawn attention since its listing, is the payment sector. Kukon operates simple payment application programming interfaces (APIs) and electronic financial API services by utilizing a network connected to domestic financial institutions.

As the payment-related market continues to grow steadily, Kukon's payment division is also expanding. Payment division sales increased from 15.7 billion KRW in 2018 to 27.5 billion KRW in 2019, and 33.6 billion KRW last year. This year, Eugene Investment & Securities expects sales of 37.7 billion KRW, and Shinhan Financial Investment forecasts 37.2 billion KRW.

Data Services to Drive Kukon's Growth... Operating Profit Margin Exceeds 40%

(Source=Eugene Investment & Securities)

However, the business Kukon is most hopeful about is the data services division. Data services refer to collecting data from financial and public institutions like a data hub and providing the necessary data to client companies. The revenue structure of data services consists of one-time setup fees, monthly basic usage fees, and commissions.

About 90% of data services revenue comes from commissions, making it a commission-dependent revenue structure. As client usage increases, revenue also grows. In particular, as the number of commercialized data APIs increases, the cumulative number of API uses by clients also rises, increasing the total commissions Kukon receives. In fact, Kukon's number of APIs is increasing. The number of new APIs was 14 in 2018, 26 in 2019, 36 last year, and 60 this year, showing an accelerating pace of API development.

The biggest advantage of commission-based services is that no additional costs occur. This leads to high profitability. The operating profit margin of the data services division, which was 24.2% in 2019, rose sharply to 36.4% last year and 41.7% in the second quarter this year. This significantly surpasses the payment division's operating profit margin of 19% recorded in the first quarter, which was affected by commission sharing with banks.

Moreover, the high entry barriers such as securing patents, trademarks, and software copyrights to start a data services business suggest that Kukon will maintain its unique position.

Based on this, rapid external growth is also expected. Shinhan Financial Investment projected that data services sales this year will increase by 46.6% year-on-year to 26.1 billion KRW. Furthermore, it forecasts 36.2 billion KRW next year and 48 billion KRW in 2023, surpassing the payment division's sales.

Kukon Emerging as a Beneficiary of MyData Competition... Business Cooperation with BNK Financial Group

(Source: Shinhan Financial Investment)

Kukon is also expected to expand its business into the MyData sector in the future. MyData means that individuals gain self-determination over their personal data, which was previously used by companies or institutions. Kukon has emerged as a beneficiary of the MyData competition that began after the amendment of the three data laws (Personal Information Protection Act, Information and Communications Network Act, Credit Information Act) passed in January last year. Competition is expected to intensify as the mandatory implementation of the MyData standard API begins in January next year.

Kukon has items to help companies that lack API development capacity or are not business operators to build MyData businesses. Kukon operates MyData platforms such as Plug In, Open Box, F info, and All in one, through which MyData services can be used.

Kukon's MyData business items are already showing results. On June 9, Kukon signed a business cooperation agreement with BNK Financial Group. It plans to launch MyData-based services on the mobile applications of BNK Financial Group's affiliates, including BNK Busan Bank, BNK Gyeongnam Bank, and BNK Capital. Additionally, the Korea Post Information Center, Woori Card, and NH Nonghyup Capital have also adopted Kukon's MyData solutions.

Hwang Seong-hwan, a researcher at Shinhan Financial Investment, explained, "Financial companies that have not received MyData business licenses or companies that find it difficult to build service personnel will inevitably increase cooperation with Kukon. Kukon is expected to continuously benefit as an industry expansion facilitator, staying one step behind in the era of infinite competition among financial platforms."