Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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<p>Our base case valuation of Kakao Bank is market cap of 26.8 trillion won or implied price of 56,144 won per share. This represents 44% higher than the high end of the IPO price range of 39,000 won but 34% lower than the current private market value of <a href="http://www.ipo38.co.kr/ipo/index.htm?o=v&amp;key=6&amp;no=1676&amp;l=&amp;page=1" target="_blank" rel="noopener">85,000 won. </a>Given the solid upside versus the IPO price range, we have a Positive Rating of the Kakao Bank IPO. </p>
<p>All in all, we believe that the there could be a nice 30-50%+ upside relative to the high end of the IPO price range (39,000 won). Nonetheless, although Kakao Bank's share could reach the private market value (85,000 won) on the first day of trading, over a longer time frame (6-12 months), we are more comfortable with the base case valuation of 56,144 won (26.8 trillion won) as a new entrant (Toss Bank) as well as existing major banks are likely to heighten their competitive pressures on the company. </p>
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Our base case valuation of Kakao Bank is market cap of 26.8 trillion won or implied price of 56,144 won per share. This represents 44% higher than the high end of the IPO price range of 39,000 won but 34% lower than the current private market value of 85,000 won. Given the solid upside versus the IPO price range, we have a Positive Rating of the Kakao Bank IPO. 
All in all, we believe that the there could be a nice 30-50%+ upside relative to the high end of the IPO price range (39,000 won). Nonetheless, although Kakao Bank's share could reach the private market value (85,000 won) on the first day of trading, over a longer time frame (6-12 months), we are more comfortable with the base case valuation of 56,144 won (26.8 trillion won) as a new entrant (Toss Bank) as well as existing major banks are likely to heighten their competitive pressures on the company. 


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.

Event-Driven

<p>This weekend, several local media published articles stating that all major domestic financial holding companies are positively reviewing interim dividends this year. These media said that they had heard so from insiders in the local financial sector.</p><p>Hana Financial Group has paid interim dividends every year. Although the other financial holding companies are able to pay interim dividends under the articles of incorporation, they have never done so.</p><div class="content-highlight"><p>The FSC conducted a stress test on banks and financial holding companies this month, and as all of them passed, the recommendation to limit dividends came to an end at the end of this month.</p></div><p>Therefore, it is highly likely that each financial holding company will hold a board meeting to determine an interim dividend after the 2Q earnings release. As dividends were limited at the beginning of this year by the financial authorities, all of them will likely pay interim dividends.</p>

This weekend, several local media published articles stating that all major domestic financial holding companies are positively reviewing interim dividends this year. These media said that they had heard so from insiders in the local financial sector.Hana Financial Group has paid interim dividends every year. Although the other financial holding companies are able to pay interim dividends under the articles of incorporation, they have never done so.The FSC conducted a stress test on banks and financial holding companies this month, and as all of them passed, the recommendation to limit dividends came to an end at the end of this month.Therefore, it is highly likely that each financial holding company will hold a board meeting to determine an interim dividend after the 2Q earnings release. As dividends were limited at the beginning of this year by the financial authorities, all of them will likely pay interim dividends.

Interim Div Yield Projections of Korean Financial Holdcos Ahead of June 29 Ex-Div Date

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<p><strong>In this insight, we provide an update of Kakao Bank </strong>which is getting ready to release its IPO prospectus in the coming days. Even without the prospectus, the company has already provided a lot of the the company's financials, industry analysis, and other materials in its annual and quarterly earnings filings. In this insight, we try to provide some of our key findings from its financial filings of Kakao Bank, but excluding the bankers' valuation assessment which is not yet available. </p>
<p>Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. In the gray market, it is currently trading at 96,500 won per share or 39.5 trillion won. The two largest banks in Korea are <a href="https://www.smartkarma.com/entities/kb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:718:1" rel="noopener">KB Financial (105560 KS)</a> and <a href="https://www.smartkarma.com/entities/shinhan-financial-group-ltd" target="_blank" data-smartkarma-citation="entities:6978:1" rel="noopener">Shinhan Financial (055550 KS),</a> which have market caps of 22.9 trillion won and 20.6 trillion won, respectively. As a result, Kakao Bank's market cap (in the gray market) is close to the combined market caps of KB Financial and Shinhan Financial (43.5 trillion won) which is quite remarkable. </p>
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In this insight, we provide an update of Kakao Bank which is getting ready to release its IPO prospectus in the coming days. Even without the prospectus, the company has already provided a lot of the the company's financials, industry analysis, and other materials in its annual and quarterly earnings filings. In this insight, we try to provide some of our key findings from its financial filings of Kakao Bank, but excluding the bankers' valuation assessment which is not yet available. 
Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. In the gray market, it is currently trading at 96,500 won per share or 39.5 trillion won. The two largest banks in Korea are KB Financial (105560 KS) and Shinhan Financial (055550 KS), which have market caps of 22.9 trillion won and 20.6 trillion won, respectively. As a result, Kakao Bank's market cap (in the gray market) is close to the combined market caps of KB Financial and Shinhan Financial (43.5 trillion won) which is quite remarkable. 


<p>The measures recommended by the financial authorities to pay dividends to banks within 20% of their net profit will likely end at the end of this month. Korea's financial holding companies will prepare for a semi-annual or quarterly dividend as soon as they pass a stress test (financial soundness assessment) to be implemented by the financial authorities soon.</p><p>In this connection, the attention is being on Shinhan Financial Group, which laid the groundwork for a quarterly dividend by amending the articles of incorporation at the general shareholders' meeting earlier this year. Accordingly, Shinhan Financial Group plans to review quarterly dividends at the earliest possible.</p>

The measures recommended by the financial authorities to pay dividends to banks within 20% of their net profit will likely end at the end of this month. Korea's financial holding companies will prepare for a semi-annual or quarterly dividend as soon as they pass a stress test (financial soundness assessment) to be implemented by the financial authorities soon.In this connection, the attention is being on Shinhan Financial Group, which laid the groundwork for a quarterly dividend by amending the articles of incorporation at the general shareholders' meeting earlier this year. Accordingly, Shinhan Financial Group plans to review quarterly dividends at the earliest possible.

Shinhan Financial Quarterly Dividends: Procedural Issues, Stress Test, & Payment Size

<p>Korea's financial regulators, the Financial Services Commission, had advised the local banks and bank holding companies to keep a dividend payout ratio below 20%. The purpose was clear. It was to secure a sufficient capital buffer to absorb potential losses resulting from COVID-19.</p><p>This recommendation for the 20% cap is effective until the end of this month.</p><p>The market widely expects the FSC to not renew this 20% dividend cap after this month amid the fast-rebounding economy.</p>

Korea's financial regulators, the Financial Services Commission, had advised the local banks and bank holding companies to keep a dividend payout ratio below 20%. The purpose was clear. It was to secure a sufficient capital buffer to absorb potential losses resulting from COVID-19.This recommendation for the 20% cap is effective until the end of this month.The market widely expects the FSC to not renew this 20% dividend cap after this month amid the fast-rebounding economy.

Korea Banks 20% Dividend Cap Scrapping: Projected Div Payout & Yield of 8 Bank Stocks

South Korea

Shinhan Financial Group Co., Ltd., a holding company, provides a full range of consumer and commercial banking-related financial services.  The company's main businesses include banking, securities brokerage, trust banking, and assets management to individuals, businesses, and other financial institutions.

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Shinhan Financial Group Adr (SHG US)

Kakao Bank Valuation Analysis

Our base case valuation of Kakao Bank is market cap of 26.8 trillion won or implied price of 56,144 won per share. This represents 44% higher than...

Douglas Kim

Interim Div Yield Projections of Korean Financial Holdcos Ahead of June 29 Ex-Div Date

This post projects the interim dividend yields of the four major Korean financial holding companies ahead of the June 29 ex-dividend date.

Sanghyun Park

An Update on the Kakao Bank IPO

We provide an update of Kakao Bank which is getting ready to release its IPO prospectus in the coming days. In the gray market, it is trading at...

Douglas Kim

Shinhan Financial Quarterly Dividends: Procedural Issues, Stress Test, & Payment Size

This post details the procedural issues, the upcoming stress test, and yearly/quarterly payment estimations of Shinhan Financial Group's possible...

Sanghyun Park

Korea Banks 20% Dividend Cap Scrapping: Projected Div Payout & Yield of 8 Bank Stocks

Korea's financial regulators will likely scrap the 20% dividend payout ratio cap this month. This post investigates the projected dividend payout...

Sanghyun Park

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