Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

<p>Currently, the biggest controversy in the valuation presented by Kakao Pay on local streets is the inclusion of PayPal.</p><p>Of course, PayPal is similar to Kakao Pay in that the payment method accounts for the majority of sales. However, the problem is that Paypal is significantly different from Kakao Pay in terms of sales volume, service market scope, and market capitalization.</p><p>PayPal operates in global markets, with a market cap of ₩385T and sales of ₩24T. On the other hand, Kakao Pay has no business base other than the domestic market. And as of last year, Kakao Pay's sales amounted to ₩284B, which is nearly one-hundredth of that of PayPal.</p><p>In particular, Kakao Pay's share of the domestic payment service market last year was only 16.6%. Even in the local market, Kakao Pay does not have a clear advantage over competing services like Samsung Pay, Payco, and Naver Pay.</p><p><strong>In conclusion, although Kakao Pay has a fast growth rate, a direct comparison with PayPal, which has a significantly different target market size and sales level, is simply unreasonable.</strong></p><p>Paypal's growth-adjusted EV/Sales multiple came in at a whopping 81.6x. Including Paypal in the valuation peer group was the direct cause of raising Kakao Pay's valuation to an irrational level.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Pay: Growth-adjusted EV/Sale"}'>Kakao Pay: Growth-adjusted EV/Sale</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Current"}'>Current</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Excluding Paypal"}'>Excluding Paypal</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Note"}'>Note</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Sales growth rate"}'>Sales growth rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.834}' data-sheets-numberformat='[null,3,"0.00%",1]'>83.40%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.834}' data-sheets-numberformat='[null,3,"0.00%",1]'>83.40%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Growth rate adjustment factor (EV/Sales multiple ÷ Sales growth rate)"}'><strong>Growth rate adjustment factor (EV/Sales multiple ÷ Sales growth rate)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44.7619777559236}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-5]C[0]"><strong>44.76x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":26.3039095727218}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=average(R[-6]C[0]:R[-6]C[1])"><strong>26.30x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'><strong>B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Growth-adjusted EV/Sales multiple"}'>Growth-adjusted EV/Sales multiple</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":37.33148944844028}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-1]C[0]*R[-2]C[0]">37.33x</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21.93746058364998}' data-sheets-numberformat='[null,2,"0.00x"]' data-sheets-formula="=R[-1]C[0]*R[-2]C[0]">21.94x</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C = A X B"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>C = A X B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Annualized sales based on 1Q21 sales"}'>Annualized sales based on 1Q21 sales</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":428.575}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>₩428.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":428.575}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>₩428.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"D"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15971.899}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>₩15,971.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9401.84716963779}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]">₩9,401.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"E = C X D"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>E = C X D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net debt"}'>Net debt</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-647.284}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>-₩647.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-647.284}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>-₩647.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"F"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>F</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'><strong>Market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16619.183}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]"><strong>₩16,619.2B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10049.131169637789}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]"><strong>₩10,049.1B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"G = E - F"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'><strong>G = E - F</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Number of diluted shares after IPO"}'>Number of diluted shares after IPO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":135880810}' data-sheets-numberformat='[null,2,"#,##0",1]'>135,880,810</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":135880810}' data-sheets-numberformat='[null,2,"#,##0",1]'>135,880,810</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"H"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>H</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price per share"}'><strong>Price per share</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":122307.0645516464}' data-sheets-numberformat='[null,4,"[$₩]#,##0",1]' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]"><strong>₩122,307</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":73955.48473428874}' data-sheets-numberformat='[null,4,"[$₩]#,##0",1]' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]"><strong>₩73,955</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"I = G / H"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'><strong>I = G / H</strong></td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>Then, if we use only the average of the other two peers excluding PayPal, the growth-adjusted EV/Sales multiple will be 26.3x. Applying this, the market cap is ₩10T, and the price per share is ₩74,000. If the same 21.51~48.49% discount rate is applied here, the market cap will range from ₩5T to ₩7.6T, and the price per share will range from ₩38,000 to ₩58,000.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low, excl. Paypal"}'>Low, excl. Paypal</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High, excl. Paypal"}'>High, excl. Paypal</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'><strong>Price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":63000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩63,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":96000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩96,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":38094.247093083985}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R20C3*(1-R[4]C[0])"><strong>₩38,094</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":58048.376522794635}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R20C3*(1-R[4]C[0])"><strong>₩58,048</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1071}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩1,071.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1632}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩1,632.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":647.6022005824277}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000"><strong>₩647.6B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":986.8224008875088}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000"><strong>₩986.8B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Institutional allotment"}'>- Institutional allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":589.0500000000001}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩589.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":897.6}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩897.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":356.18121032033525}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R12C2"><strong>₩356.2B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":542.7523204881298}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R12C2"><strong>₩542.8B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'><strong>Implied market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8213.128875}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*130367125/1000000000">₩8,213.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12515.244}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*130367125/1000000000">₩12,515.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4966.237472564967}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*130367125/1000000000"><strong>₩4,966.2B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7567.599958194233}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*130367125/1000000000"><strong>₩7,567.6B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'>- Discount</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.48490301659233187}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R20C2-R[-4]C[0])/R20C2">48.49%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.21509031099783904}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R20C2-R[-4]C[0])/R20C2">21.51%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.48490301659233187}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[-2]"><strong>48.49%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.21509031099783904}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[0]C[-2]"><strong>21.51%</strong></td>
</tr>
<tr><td colspan="5" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

Currently, the biggest controversy in the valuation presented by Kakao Pay on local streets is the inclusion of PayPal.Of course, PayPal is similar to Kakao Pay in that the payment method accounts for the majority of sales. However, the problem is that Paypal is significantly different from Kakao Pay in terms of sales volume, service market scope, and market capitalization.PayPal operates in global markets, with a market cap of ₩385T and sales of ₩24T. On the other hand, Kakao Pay has no business base other than the domestic market. And as of last year, Kakao Pay's sales amounted to ₩284B, which is nearly one-hundredth of that of PayPal.In particular, Kakao Pay's share of the domestic payment service market last year was only 16.6%. Even in the local market, Kakao Pay does not have a clear advantage over competing services like Samsung Pay, Payco, and Naver Pay.In conclusion, although Kakao Pay has a fast growth rate, a direct comparison with PayPal, which has a significantly different target market size and sales level, is simply unreasonable.Paypal's growth-adjusted EV/Sales multiple came in at a whopping 81.6x. Including Paypal in the valuation peer group was the direct cause of raising Kakao Pay's valuation to an irrational level.








Kakao Pay: Growth-adjusted EV/Sale
Current
Excluding Paypal
Note


Sales growth rate
83.40%
83.40%
A


Growth rate adjustment factor (EV/Sales multiple ÷ Sales growth rate)
44.76x
26.30x
B


Growth-adjusted EV/Sales multiple
37.33x
21.94x
C = A X B


Annualized sales based on 1Q21 sales
₩428.6B
₩428.6B
D


Enterprise value (EV)
₩15,971.9B
₩9,401.8B
E = C X D


Net debt
-₩647.3B
-₩647.3B
F


Market cap
₩16,619.2B
₩10,049.1B
G = E - F


Number of diluted shares after IPO
135,880,810
135,880,810
H


Price per share
₩122,307
₩73,955
I = G / H

Source: DART

Then, if we use only the average of the other two peers excluding PayPal, the growth-adjusted EV/Sales multiple will be 26.3x. Applying this, the market cap is ₩10T, and the price per share is ₩74,000. If the same 21.51~48.49% discount rate is applied here, the market cap will range from ₩5T to ₩7.6T, and the price per share will range from ₩38,000 to ₩58,000.









Indicative price band
Low
High
Low, excl. Paypal
High, excl. Paypal


Price
₩63,000
₩96,000
₩38,094
₩58,048


Base deal size
₩1,071.0B
₩1,632.0B
₩647.6B
₩986.8B


- Institutional allotment
₩589.1B
₩897.6B
₩356.2B
₩542.8B


Implied market cap
₩8,213.1B
₩12,515.2B
₩4,966.2B
₩7,567.6B


- Discount
48.49%
21.51%
48.49%
21.51%

Source: DART



<div><div><h2>Offering size</h2></div></div><div>
<p>Kakao Pay offers 17M shares, which account for 15% of the pre-IPO total shares, of which 55-75% are allocated to institutions.</p>
<div class="content-highlight">
<p><strong>Who is Kakao Pay?</strong></p>
<p>Launched on September 5, 2014, it is a remittance and payment service simply by entering your password after registering your credit and debit card information in KakaoTalk.</p>
<p><iframe src="https://www.youtube.com/embed/vjhmJaeI5ZI" width="640" height="360" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
</div>
</div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Offering size"}'>Offering size</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}' data-sheets-formula="=R[-45]C[0]">Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"377300"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-45]C[0]">377300</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}' data-sheets-formula="=R[-45]C[0]">Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-45]C[0]">KOSPI</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'><strong>Offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":17000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-42]C[0]"><strong>17,000,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of pre-IPO SO"}'><strong>- % of pre-IPO SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.14995528906638497}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-40]C[0]"><strong>15.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional allotment"}'><strong>Institutional allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"55.00~75.00%"}'><strong>55.00~75.00%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Split</h2><p>This is a 100% primary offering. As a result, this offering will see a capital increase rate of 15% with a shareholding dilution of 13.04%. This IPO is free of any additional options: cornerstone, clawback, or greenshoe.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Split"}'>Split</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Primary %"}'><strong>Primary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-42]C[0]"><strong>100.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Secondary %"}'>Secondary %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-41]C[0]">0.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'><strong>Capital increase rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.14995528906638497}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-39]C[0]"><strong>15.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'><strong>Dilution</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.13040097340491325}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-39]C[0]"><strong>13.04%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><div><div><h2>Schedule</h2></div></div><div>
<p>The book opens on July 29 (for both local and overseas investors) and runs for two days until July 30. The allotment will be on August 2 as finalizing the offering price. We have the subscription on August 4.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'><strong>Book open</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44406}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 29</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44407}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 30</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'><strong>Allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44410}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 2</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'><strong>Subscription</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44412}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 4</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44417}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 9</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"TBA"}'>TBA</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div><div><div><h2>Pricing</h2></div></div><div>
<p>Kakao Pay used the relative value calculation through the growth-adjusted EV/Sales evaluation method. And the valuation peer group includes Paypal, Square, and PagSeguro Digital.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Valuation peers: Growth-adjusted EV/Sale"}'>Valuation peers: Growth-adjusted EV/Sale</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Paypal Holdings Inc"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Paypal Holdings Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Square Inc"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Square Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"PagSeguro Digital Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>PagSeguro Digital Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"PYPL"}' data-sheets-formula='="PYPL"'>PYPL</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SQ"}' data-sheets-formula='="SQ"'>SQ</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"PAGS"}' data-sheets-formula='="PAGS"'>PAGS</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":315.369}' data-sheets-numberformat='{"1":2,"2":"$#,##0.0B","3":1}'>$315.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":102.447}' data-sheets-numberformat='{"1":2,"2":"$#,##0.0B","3":1}'>$102.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16.865}' data-sheets-numberformat='{"1":2,"2":"$#,##0.0B","3":1}'>$16.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Annualized sales based on 1Q21 sales"}'>Annualized sales based on 1Q21 sales</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":24.132}' data-sheets-numberformat='{"1":2,"2":"$#,##0.0B","3":1}'>$24.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":20.229}' data-sheets-numberformat='{"1":2,"2":"$#,##0.0B","3":1}'>$20.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.511}' data-sheets-numberformat='{"1":2,"2":"$#,##0.0B","3":1}'>$1.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EV/Sales multiple"}'>EV/Sales multiple</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13.068498259572353}' data-sheets-numberformat='{"1":2,"2":"0.00x"}'>13.07x</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.064363043155866}' data-sheets-numberformat='{"1":2,"2":"0.00x"}'>5.06x</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11.161482461945731}' data-sheets-numberformat='{"1":2,"2":"0.00x"}'>11.16x</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Sales growth rate"}'>Sales growth rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.16}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>16.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.83}' data-sheets-numberformat='[null,3,"0.00%",1]'>83.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.24}' data-sheets-numberformat='[null,3,"0.00%",1]'>24.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Growth rate adjustment coefficient (EV/Sales multiple / Sales growth rate)"}'><strong>Growth rate adjustment factor (EV/Sales multiple ÷ Sales growth rate)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":81.6781141223272}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>81.68x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6.101642220669718}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>6.10x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":46.50617692477388}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>46.51x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average"}'><strong>Average</strong></td>
<td colspan="3" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":44.7619777559236}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=average(R[-1]C[0]:R[-1]C[2])"><strong>44.76x</strong></td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div><div><div>This valuation is a bit difficult. Growth-adjusted EV/Sales is calculated by applying Kakao Pay's 1Q21 based annualized sales to the growth-adjusted EV/Sales multiple, reflecting the growth rate adjustment factor.</div></div><div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Kakao Pay: Growth-adjusted EV/Sale"}'>Kakao Pay: Growth-adjusted EV/Sale</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Sales growth rate"}'>Sales growth rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.834}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>83.40%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Growth rate adjustment coefficient (EV/Sales multiple / Sales growth rate)"}'>Growth rate adjustment factor (EV/Sales multiple <strong>÷</strong> Sales growth rate)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44.7619777559236}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-5]C[0]">44.76x</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Growth-adjusted EV/Sales multiple"}'>Growth-adjusted EV/Sales multiple</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":37.33148944844028}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-1]C[0]*R[-2]C[0]">37.33x</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C = A X B"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>C = A X B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Annualized sales based on 1Q21 sales"}'>Annualized sales based on 1Q21 sales</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":428.575}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>₩428.6B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"D"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Enterprise value (EV)"}'>Enterprise value (EV)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15971.899}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>₩15,971.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"E = C X D"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>E = C X D</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net debt"}'>Net debt</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-647.284}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>-₩647.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"F"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>F</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'><strong>Market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16619.183}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]"><strong>₩16,619.2B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"G = E - F"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'><strong>G = E - F</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Number of diluted shares after IPO"}'>Number of diluted shares after IPO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":135880810}' data-sheets-numberformat='[null,2,"#,##0",1]'>135,880,810</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"H"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'>H</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price per share"}'><strong>Price per share</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":122307.0645516464}' data-sheets-numberformat='[null,4,"[$₩]#,##0",1]' data-sheets-formula="=R[-2]C[0]*1000000000/R[-1]C[0]"><strong>₩122,307</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"I = G / H"}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]'><strong>I = G / H</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div><div><div><div>A 21.51~48.49% discount sets up an indicative price band of ₩63,000~96,000, suggesting a market cap of ₩8.21~12.52T.</div></div></div><div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'><strong>Price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":63000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩63,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":96000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩96,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1071}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩1,071.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1632}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩1,632.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Institutional allotment"}'>- Institutional allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":589.0500000000001}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩589.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":897.6}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩897.6B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'><strong>Implied market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8213.128875}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*130367125/1000000000"><strong>₩8,213.1B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12515.244}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*130367125/1000000000"><strong>₩12,515.2B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'><strong>- Discount</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.48490301659233187}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R20C2-R[-4]C[0])/R20C2"><strong>48.49%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.21509031099783904}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R20C2-R[-4]C[0])/R20C2"><strong>21.51%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div><div><div><div></div></div></div>

Offering size
Kakao Pay offers 17M shares, which account for 15% of the pre-IPO total shares, of which 55-75% are allocated to institutions.

Who is Kakao Pay?
Launched on September 5, 2014, it is a remittance and payment service simply by entering your password after registering your credit and debit card information in KakaoTalk.








Offering size

Ticker
377300


Bourse
KOSPI


Offering
17,000,000


- % of pre-IPO SO
15.00%


Institutional allotment
55.00~75.00%

Source: DART

SplitThis is a 100% primary offering. As a result, this offering will see a capital increase rate of 15% with a shareholding dilution of 13.04%. This IPO is free of any additional options: cornerstone, clawback, or greenshoe.





Split

Primary %
100.00%


Secondary %
0.00%


Capital increase rate
15.00%


Dilution
13.04%

Source: DART

Schedule
The book opens on July 29 (for both local and overseas investors) and runs for two days until July 30. The allotment will be on August 2 as finalizing the offering price. We have the subscription on August 4.






Schedule

Book open
2021. 7. 29


Book close
2021. 7. 30


Allotment
2021. 8. 2


Subscription
2021. 8. 4


Payment
2021. 8. 9


Listing
TBA

Source: DART


Pricing
Kakao Pay used the relative value calculation through the growth-adjusted EV/Sales evaluation method. And the valuation peer group includes Paypal, Square, and PagSeguro Digital.









Valuation peers: Growth-adjusted EV/Sale
Paypal Holdings Inc
Square Inc
PagSeguro Digital Ltd


Ticker
PYPL
SQ
PAGS


Enterprise value (EV)
$315.4B
$102.4B
$16.9B


Annualized sales based on 1Q21 sales
$24.1B
$20.2B
$1.5B


EV/Sales multiple
13.07x
5.06x
11.16x


Sales growth rate
16.00%
83.00%
24.00%


Growth rate adjustment factor (EV/Sales multiple ÷ Sales growth rate)
81.68x
6.10x
46.51x


Average
44.76x

Source: DART


This valuation is a bit difficult. Growth-adjusted EV/Sales is calculated by applying Kakao Pay's 1Q21 based annualized sales to the growth-adjusted EV/Sales multiple, reflecting the growth rate adjustment factor.






Kakao Pay: Growth-adjusted EV/Sale

Sales growth rate
83.40%
A


Growth rate adjustment factor (EV/Sales multiple ÷ Sales growth rate)
44.76x
B


Growth-adjusted EV/Sales multiple
37.33x
C = A X B


Annualized sales based on 1Q21 sales
₩428.6B
D


Enterprise value (EV)
₩15,971.9B
E = C X D


Net debt
-₩647.3B
F


Market cap
₩16,619.2B
G = E - F


Number of diluted shares after IPO
135,880,810
H


Price per share
₩122,307
I = G / H

Source: DART

A 21.51~48.49% discount sets up an indicative price band of ₩63,000~96,000, suggesting a market cap of ₩8.21~12.52T.







Indicative price band
Low
High


Price
₩63,000
₩96,000


Base deal size
₩1,071.0B
₩1,632.0B


- Institutional allotment
₩589.1B
₩897.6B


Implied market cap
₩8,213.1B
₩12,515.2B


- Discount
48.49%
21.51%

Source: DART



Kakao Pay IPO: Offering Detail & Valuation Issues

<p>In calculating the corporate value for this listing, Kakao Bank selected PBR, the traditional method of calculating the value of financial companies.</p><p><strong>Apparently, the local street has no big disagreement about the use of PBR itself.</strong></p><p>Then, what matters is the level of the PBR multiple premium.</p><p><strong>Based on the indicative price band, Kakao Bank's PBR is 3.2-3.5x. On the other hand, the PBRs of Korea's four major financial holding companies are currently hovering between 0.4 and 0.5x.</strong></p><p><strong>That is, based on the current corporate value to net assets, Kakao Bank wants to receive a 7 to 8 times higher premium than Korea's major commercial banks.</strong></p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'>Price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩33,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":39000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩39,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'>Implied market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15766.510221}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*R14C2/1000000000">₩15,766.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18633.148443}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*R14C2/1000000000">₩18,633.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity, including capital inflow from IPO"}'>Equity, including capital inflow from IPO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5009.4}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-13]C[0]+R[-12]C[0]">₩5,009.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5402.05}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-13]C[-1]+(Terms!R[-15]C[-1]*R[-5]C[0])/1000000000">₩5,402.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'><strong>PBR</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3.1473849604743087}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-3]C[0]/R[-1]C[0]"><strong>3.15x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3.449273598541294}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-3]C[0]/R[-1]C[0]"><strong>3.45x</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The valuation that converts the future value into present value at a time when growth is expected to stagnate still holds a significant premium.</p><p><strong>Kakao Bank's total deposits estimated as of 2025, when high growth will likely come to an end, are around ₩100T. Applying KB Financial's current multiple of 0.06 times the total deposits puts Kakao Bank's value in 2025 at ₩6T. Converted to the present value, the present value becomes ₩4.3T, suggesting a 3.7 to 4.3x premium to KB Financial.</strong></p>

In calculating the corporate value for this listing, Kakao Bank selected PBR, the traditional method of calculating the value of financial companies.Apparently, the local street has no big disagreement about the use of PBR itself.Then, what matters is the level of the PBR multiple premium.Based on the indicative price band, Kakao Bank's PBR is 3.2-3.5x. On the other hand, the PBRs of Korea's four major financial holding companies are currently hovering between 0.4 and 0.5x.That is, based on the current corporate value to net assets, Kakao Bank wants to receive a 7 to 8 times higher premium than Korea's major commercial banks.







Indicative price band
Low
High


Price
₩33,000
₩39,000


Implied market cap
₩15,766.5B
₩18,633.1B


Equity, including capital inflow from IPO
₩5,009.4B
₩5,402.1B


PBR
3.15x
3.45x

Source: DART

The valuation that converts the future value into present value at a time when growth is expected to stagnate still holds a significant premium.Kakao Bank's total deposits estimated as of 2025, when high growth will likely come to an end, are around ₩100T. Applying KB Financial's current multiple of 0.06 times the total deposits puts Kakao Bank's value in 2025 at ₩6T. Converted to the present value, the present value becomes ₩4.3T, suggesting a 3.7 to 4.3x premium to KB Financial.

Kakao Bank IPO: Valuation Peer Group Issues & Local Street's General View on Valuation Level

<div><h2>Offering size</h2></div><div>
<p>Kakao Bank released an IPO prospectus. Kakao Bank is the second Internet-only bank in Korea. It was officially launched on July 27, 2017. Unlike K-Bank, the first Internet-only bank, Kakao Bank is 100% mobile-only. Kakao Bank offers 65.45M shares, which account for 15.98% of the total shares, of which 55-75% are allocated to institutions.</p>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Offering size"}'>Offering size</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":323410}'>323410</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bourse"}'>Bourse</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}'>KOSPI</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering"}'><strong>Offering</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":65450000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>65,450,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- % of pre-IPO SO"}'><strong>- % of pre-IPO SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1598}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>15.98%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional allotment"}'><strong>Institutional allotment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"55.00~75.00%"}'><strong>55.00~75.00%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><h2>Split</h2></div>
<div><p>This is a 100% primary offering. As a result, this offering will see a capital increase rate of 15.98%. In addition, this IPO is free of any additional options: cornerstone, clawback, or greenshoe.</p></div>
<div>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Split"}'>Split</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Primary %"}'><strong>Primary %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6987911807185323}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[3]C[0]"><strong>100.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Secondary %"}'>Secondary %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3012088192814677}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[0]">0.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'><strong>Capital increase rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.16245294237403599}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[0]"><strong>15.98%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'><strong>Dilution</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.139750123598349}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Terms!R[4]C[0]"><strong>13.78%</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><h2>Schedule</h2></div>
<div><p>The book opens on July 9 (for overseas investors) and runs until July 21. The allotment will be on July 22 with a final offering price. The subscription follows on July 26.</p></div>
<div>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'><strong>Book open</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44375}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 9</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44386}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'>Allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44389}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 22</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'><strong>Subscription</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44391}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 26</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'><strong>Payment</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44396}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 7. 29</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"TBA"}'>2021. 8. 5</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
<div><h2>Pricing</h2></div>
<div>
<p>This IPO selected the following 4 valuation peers: Rocket Companies, PagSeguro Digital, TCS Group, and Nordnet AB. They calculated an average PBR of 7.3x by applying net assets as of 1Q11 to the market cap as of June 21.</p>
<table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Valuation peers"}'>PBR valuation</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Rocket Companies Inc"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Rocket Companies Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"PagSeguro Digital Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>PagSeguro Digital Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"TCS Group Holding PLC"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>TCS Group Holding PLC</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Nordnet AB (publ)"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Nordnet AB (publ)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"RKT"}' data-sheets-formula='="RKT"'>NYSE: RKT</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"PAGS"}' data-sheets-formula='="PAGS"'>NYSE: PAGS</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"MCX:TCSG"}' data-sheets-formula='="MCX:TCSG"'>MCX: TCSG</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"STO:SAVE"}' data-sheets-formula='="STO:SAVE"'>STO: SAVE</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Reference market cap: MIN[1M Avg, 1W Avg, 1D Close] as of June 21"}'>Reference market cap: MIN[1M Avg, 1W Avg, 1D Close] as of June 21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":43184.655}'>₩43,184.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18918.666}'>₩18,918.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16522.978}'>₩16,523.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4923.031}'>₩4,923.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity, as of 1Q21"}'>Equity, as of 1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9404.053}'>₩9,404.1B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2152.996}'>₩2,153.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2057.841}'>₩2,057.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":644.004}'>₩644.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'><strong>PBR</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.592132243406114}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>4.6x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8.787134764765007}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>8.8x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8.029278258135589}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>8.0x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.64441059372302}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=R[-2]C[0]/R[-1]C[0]"><strong>7.6x</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Average PBR"}'><strong>Average PBR</strong></td>
<td colspan="4" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":7.2632389650074325}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}' data-sheets-formula="=average(R[-1]C[0]:R[-1]C[3])"><strong>7.3x</strong></td>
</tr>
<tr><td colspan="5" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>
<div><div><p>After applying the 7.3x multiple to Kakao Bank's equity in Q1 of this year, they added funds from the public offering to derive a market cap of ₩22.97T. This was then divided by the post-IPO total shares to arrive at ₩48,058 per share.</p></div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Kakao PBR"}'>Kakao PBR</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'>PBR</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.3}' data-sheets-numberformat='{"1":2,"2":"0.0x","3":1}'>7.3x</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A"}'>A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity, as of 1Q21"}'>Equity, as of 1Q21</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2849.5}' data-sheets-formula="=2849.5">₩2,849.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital inflow from IPO (based on the lower end of the indicative price band)"}'>Capital inflow from IPO (based on the lower end of the indicative price band)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2159.9}'>₩2,159.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C"}'>C</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'><strong>Market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":22961.25}' data-sheets-formula="=R[-2]C[0]*R[-3]C[0]+R[-1]C[0]"><strong>₩22,961.3B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A × B + C"}'><strong>A × B + C</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Post-IPO SO"}'>Post-IPO SO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":477773037}'>477,773,037</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price per share"}'><strong>Price per share</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":48058}'><strong>₩48,058</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
<div><div>An 18.85~31.33% discount sets up an indicative price band of ₩33,000~39,000, implying a market cap of ₩15.77~18.63T.</div></div>
<div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'><strong>Price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33000}'><strong>₩33,000</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":39000}'><strong>₩39,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Base deal size"}'>Base deal size</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2159.85}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩2,159.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2552.55}' data-sheets-formula="=R[-1]C[0]*Terms!R8C2/1000000000">₩2,552.6B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Institutional allotment"}'>- Institutional allotment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1187.9175}' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩1,187.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1403.9025000000001}' data-sheets-formula="=R[-1]C[0]*Terms!R12C2">₩1,403.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'><strong>Implied market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15766.510221}' data-sheets-formula="=R[-3]C[0]*R14C2/1000000000"><strong>₩15,766.5B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18633.148443}' data-sheets-formula="=R[-3]C[0]*R14C2/1000000000"><strong>₩18,633.1B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Discount"}'><strong>- Discount</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3133426873101421}' data-sheets-formula="=(R13C2-R[-1]C[0])/R13C2"><strong>31.33%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.18849590318471346}' data-sheets-formula="=(R13C2-R[-1]C[0])/R13C2"><strong>18.85%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table></div>
</div>
</div>
</div>

Offering size
Kakao Bank released an IPO prospectus. Kakao Bank is the second Internet-only bank in Korea. It was officially launched on July 27, 2017. Unlike K-Bank, the first Internet-only bank, Kakao Bank is 100% mobile-only. Kakao Bank offers 65.45M shares, which account for 15.98% of the total shares, of which 55-75% are allocated to institutions.






Offering size

Ticker
323410


Bourse
KOSPI


Offering
65,450,000


- % of pre-IPO SO
15.98%


Institutional allotment
55.00~75.00%

Source: DART


Split
This is a 100% primary offering. As a result, this offering will see a capital increase rate of 15.98%. In addition, this IPO is free of any additional options: cornerstone, clawback, or greenshoe.







Split

Primary %
100.00%


Secondary %
0.00%


Capital increase rate
15.98%


Dilution
13.78%

Source: DART


Schedule
The book opens on July 9 (for overseas investors) and runs until July 21. The allotment will be on July 22 with a final offering price. The subscription follows on July 26.







Schedule

Book open
2021. 7. 9


Book close
2021. 7. 21


Allotment
2021. 7. 22


Subscription
2021. 7. 26


Payment
2021. 7. 29


Listing
2021. 8. 5

Source: DART


Pricing

This IPO selected the following 4 valuation peers: Rocket Companies, PagSeguro Digital, TCS Group, and Nordnet AB. They calculated an average PBR of 7.3x by applying net assets as of 1Q11 to the market cap as of June 21.










PBR valuation
Rocket Companies Inc
PagSeguro Digital Ltd
TCS Group Holding PLC
Nordnet AB (publ)


Ticker
NYSE: RKT
NYSE: PAGS
MCX: TCSG
STO: SAVE


Reference market cap: MIN[1M Avg, 1W Avg, 1D Close] as of June 21
₩43,184.7B
₩18,918.7B
₩16,523.0B
₩4,923.0B


Equity, as of 1Q21
₩9,404.1B
₩2,153.0B
₩2,057.8B
₩644.0B


PBR
4.6x
8.8x
8.0x
7.6x


Average PBR
7.3x

Source: DART



After applying the 7.3x multiple to Kakao Bank's equity in Q1 of this year, they added funds from the public offering to derive a market cap of ₩22.97T. This was then divided by the post-IPO total shares to arrive at ₩48,058 per share.







Kakao PBR

PBR
7.3x
A


Equity, as of 1Q21
₩2,849.5B
B


Capital inflow from IPO (based on the lower end of the indicative price band)
₩2,159.9B
C


Market cap
₩22,961.3B
A × B + C


Post-IPO SO
477,773,037
-


Price per share
₩48,058
-

Source: DART


An 18.85~31.33% discount sets up an indicative price band of ₩33,000~39,000, implying a market cap of ₩15.77~18.63T.








Indicative price band
Low
High


Price
₩33,000
₩39,000


Base deal size
₩2,159.9B
₩2,552.6B


- Institutional allotment
₩1,187.9B
₩1,403.9B


Implied market cap
₩15,766.5B
₩18,633.1B


- Discount
31.33%
18.85%

Source: DART






Kakao Bank IPO: Offering Detail, Valuation Issue, & Index Fast Entry

Event-Driven

<p>Kakao has seen around 9% correction in the last two trading days.</p><p>In the case of last Thursday, Kakao was attacked by a short sale of ₩121.5B, which is the largest amount of short selling among KOSPI stocks that day.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/412/original/Kakao.png?1624677796" class="editor-image img-responsive" data-smartkarma-image-id="215412"></figure></section><p>Nevertheless, Kakao is still recording a share price increase of close to 100% on a YTD basis. Therefore, it is necessary to examine Kakao's valuation at this point carefully.</p><p>This is to determine whether to continue to hold the short position or to use the stock price correction of the last two trading days as the time to close the position.</p>

Kakao has seen around 9% correction in the last two trading days.In the case of last Thursday, Kakao was attacked by a short sale of ₩121.5B, which is the largest amount of short selling among KOSPI stocks that day.Nevertheless, Kakao is still recording a share price increase of close to 100% on a YTD basis. Therefore, it is necessary to examine Kakao's valuation at this point carefully.This is to determine whether to continue to hold the short position or to use the stock price correction of the last two trading days as the time to close the position.

Kakao Valuation Studies: 12M Forward PER, Enterprise Multiples, & Discount to NAV

South Korea

Kakao Entertainment Corp. operates as an application software development company. The Company provides online cartoons, online novels, music, and more. Kakao Entertainment conducts businesses in South Korea.

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Kakao Entertainment (103260 KS)

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