[Inside the Stock] Why the National Pension Service Bought More of AfreecaTV

Google Payment Policy Changes, Q4 Earnings Decline Due to Relay Fees
Ad Revenue Growth, PER at Historic Low of 11.2x

[Asia Economy Reporter Jang Hyowon] The 'big player' in the stock market, the National Pension Service (NPS), purchased a large amount of AfreecaTV shares at the end of last year when the stock price was continuously falling. The market believes that although AfreecaTV's stock price declined due to concerns over fundamentals, its advertising revenue is expected to remain solid this year. This is interpreted as the reason why the NPS increased its holdings in AfreecaTV.

According to the Financial Supervisory Service's electronic disclosure on the 11th, the NPS invested about 30 billion KRW between October and November last year to acquire an additional 382,725 shares of AfreecaTV. As a result, the NPS's stake in AfreecaTV increased from the previous 5.22% to 8.55%.

AfreecaTV's stock price showed a continuous downward trend last year. Starting in the 200,000 KRW range at the beginning of last year, the stock price plummeted to the 70,000 KRW range by the end of the year. As the stock price fell, the NPS bought more AfreecaTV shares. The estimated purchase price by the NPS was between 70,000 and 90,000 KRW per share.

The reason for AfreecaTV's poor stock performance is analyzed to be concerns over fundamentals. Jeong Hoyoon, a researcher at Korea Investment & Securities, pointed out, “AfreecaTV's monthly active users (MAU) have decreased to 4.8 million, the lowest level ever, and recently, the number of paying users (PU) is also declining. This inevitably raises concerns about the overall growth potential of the platform.”

In fact, AfreecaTV's average market consensus for operating profit in the fourth quarter of last year is 19 billion KRW, expected to decrease by 22.76% compared to the same period last year. Recently, there are also forecasts that it will record 17 billion KRW, below the consensus.

This is analyzed to be due to the negative impact of Google's payment policy changes in the third quarter of last year, which caused light payment users to leave. In particular, the fourth quarter of last year is estimated to have increased operating expenses due to various one-time costs such as the BJ awards ceremony and World Cup broadcasting rights fees.

Nevertheless, the market views AfreecaTV's growth potential positively. This is because advertising revenue growth is expected to continue this year. From a stock price perspective, the price-to-earnings ratio (PER) based on last year's earnings estimates is 11.2 times, approaching a historic low level.

Kim Dongwoo, a researcher at Kyobo Securities, said, “Although the advertising market is expected to show a slowdown this year, AfreecaTV's content-type advertising revenue is expected to grow rapidly due to the production of signature content by Best BJs, strengthening integrated marketing functions linking online and offline, and diversification of advertisers.” He added, “Platform advertising will also continue to grow by advancing solution functions and introducing mid-roll and banner ads.”

He continued, “AfreecaTV is transforming from a business model focused on star balloons to a comprehensive marketing channel based on competitiveness in game and entertainment content,” and forecasted, “If it secures a niche market in the live commerce market based on the BJ fandom in the mid to long term, the stock price will rise further.”

Lee Hyojin, a researcher at Meritz Securities, also analyzed, “AfreecaTV's advertising revenue growth rate is expected to reach 37% this year,” adding, “Advertising revenue, which was around 30 billion KRW in 2020, is expected to exceed 100 billion KRW this year and maintain a growth rate in the 30% range until 2024.”