[Click eStock] "Kakao, Possible Withdrawal from Screen Golf... Golfzon Target Price Up"

[Asia Economy Reporter Ji Yeon-jin] Meritz Securities announced on the 5th that due to Kakao's controversy over encroaching on local businesses, competition in the screen golf market is expected to ease, and it has raised the target price for the leading company Golfzon from the previous 180,000 KRW to 200,000 KRW.

Kakao VX, which acquired the 2nd and 3rd place brands in the screen golf market, is the second-largest operator following Golfzon, which currently holds about 20% market share in screen golf. Kakao announced that it is considering reorganizing and withdrawing its affiliates involved in local business controversies, including hair salons and screen golf businesses.

Researcher Lee Hyo-jin of Meritz Securities said, "Whether Kakao VX will be sold or remain within the Kakao Group is currently uncertain," adding, "However, the increased uncertainty regarding the direction or fate of the second-largest operator, which has continued to operate at a loss, is not bad news for the leading company."

Golfzon's consolidated sales and operating profit for the third quarter are expected to increase by 34% and 111.0% year-on-year to 106.7 billion KRW and 32.9 billion KRW, respectively. The number of rounds, which has the highest profit margin, is higher than expected, and the execution of expenses allocated for new businesses has been deferred to the fourth quarter and beyond, raising the quarterly estimates.

The researcher explained, "The GDR business, which has a high correlation with the influx of new golfers, is expected to continue its turnaround from the second quarter and show a full-fledged profit structure from the third quarter," adding, "Although expenses are expected to be actively executed in the fourth quarter with Golfzon Park TV advertisements, since this has already been reflected in the annual estimates, the possibility of further downward revisions is low."