Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div><p>Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.</p></div><div><p>As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.</p></div><div><p>Since spinning out from Kakao in 2017, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. </p></div><div><p>Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.</p></div><div>
<p>We have covered most aspects of the deal in our earlier notes, <a href="https://www.smartkarma.com/insights/kakao-pay-ipo-guided-by-ant-financial-to-be-a-mini-ant" target="_blank" rel="noopener">Kakao Pay IPO - Guided by Ant Financial to be a mini Ant </a>and  <a href="https://www.smartkarma.com/insights/kakao-pay-ipo-peer-comparison-local-and-international" target="_blank" rel="noopener">Kakao Pay IPO - Peer comparison - local and international</a>.</p>
<p>In this note we will talk about valuations and the latest announcement by the regulators.</p>
</div>

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.Since spinning out from Kakao in 2017, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.
We have covered most aspects of the deal in our earlier notes, Kakao Pay IPO - Guided by Ant Financial to be a mini Ant and  Kakao Pay IPO - Peer comparison - local and international.
In this note we will talk about valuations and the latest announcement by the regulators.


Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<div id="aNews">
<div id="aN_content">
<div id="aNews_View">
<div>There have been a lot of concerns in the past year about the two Internet giants in Korea - Naver and Kakao becoming too powerful and dominant in Korea. Most of the discussions have been just talk without concrete actions. However, this is about to change materially as several senior members of the Korean government have provided strong indications that greater levels of restrictions could be placed on these two Internet giants and their affiliates in terms of their business operations.</div>
<div></div>
<div>The Korean government which is trying to crack down on the two key Internet giants in Korea is similar to how the Chinese government is trying to crack down on the Internet giants in China. <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> shares declined by 7.9% and 10.1%, respectively today following concerns about greater amount of regulatory restrictions on the company and its affiliates' operations. </div>
<div></div>
</div>
</div>
<div>
<div class="content-highlight">
<div>All in all, investors generally despise excessive uncertainty and higher potential for government meddling. These have been key factors that have driven the share prices of the major Chinese Internet tech stocks lower in the past several months.</div>
<div></div>
<ul>
<li>Although it remains to be seen how much the Korean government will try to crack down on the Korean Internet giants, the timing of their meddling over the next 3-6 months as we draw closer to the Presidential election in March 2022 is likely to become GREATER, not LESS.</li>
<li>Consequently, we believe that investors should take into consideration the potential for greater government regulations surrounding major business operations of Kakao and Naver and their affiliates in the next 3-6 months, especially on the financial sector.</li>
<li>The higher likelihood is for greater clarity in what they can or cannot do could become more specific after the Presidential election in March 2022. </li>
</ul>
</div>
</div>
</div>




There have been a lot of concerns in the past year about the two Internet giants in Korea - Naver and Kakao becoming too powerful and dominant in Korea. Most of the discussions have been just talk without concrete actions. However, this is about to change materially as several senior members of the Korean government have provided strong indications that greater levels of restrictions could be placed on these two Internet giants and their affiliates in terms of their business operations.

The Korean government which is trying to crack down on the two key Internet giants in Korea is similar to how the Chinese government is trying to crack down on the Internet giants in China. Naver Corp (035420 KS) and Kakao Corp (035720 KS) shares declined by 7.9% and 10.1%, respectively today following concerns about greater amount of regulatory restrictions on the company and its affiliates' operations. 





All in all, investors generally despise excessive uncertainty and higher potential for government meddling. These have been key factors that have driven the share prices of the major Chinese Internet tech stocks lower in the past several months.


Although it remains to be seen how much the Korean government will try to crack down on the Korean Internet giants, the timing of their meddling over the next 3-6 months as we draw closer to the Presidential election in March 2022 is likely to become GREATER, not LESS.
Consequently, we believe that investors should take into consideration the potential for greater government regulations surrounding major business operations of Kakao and Naver and their affiliates in the next 3-6 months, especially on the financial sector.
The higher likelihood is for greater clarity in what they can or cannot do could become more specific after the Presidential election in March 2022. 





The Korean Government Could Follow the Chinese Government in Cracking Down on the Internet Giants

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

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

<p>From now on, for financial platforms such as Kakao Pay and Naver Financial to compare and recommend customized financial products, they must register with the Financial Services Commission in accordance with the Financial Consumer Protection Act.</p><p>So far, they have been able to stay under the regulation radar, insisting that they were advertising, not brokering financial products.</p><div class="content-highlight"><p><strong>The FSC held a meeting in this regard yesterday. Through this meeting, the FSC concluded that financial platforms such as Kakao Pay should be viewed as intermediaries if they intended to sell financial products rather than simply provide product information.</strong></p></div><section class="figure"><section class="figure"><p>The specific business cases of the financial platform are specified below, and all of these actions are categories as brokerage, so business registration is required with the FSC. (The original press release document is attached below.)</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/447/original/Screen+Shot+2021-09-07+at+10.31.24+PM.png?1631068565" class="editor-image img-responsive" data-smartkarma-image-id="228447"></figure></section></section><hr><p>The tightening of regulations on financial platforms by the Financial Services Commission is the cause of the sharp decline in the stock prices of Kakao and Naver today.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/445/original/Screen+Shot+2021-09-07+at+10.26.48+PM.png?1631068024" class="editor-image img-responsive" data-smartkarma-image-id="228445"></figure></section>

From now on, for financial platforms such as Kakao Pay and Naver Financial to compare and recommend customized financial products, they must register with the Financial Services Commission in accordance with the Financial Consumer Protection Act.So far, they have been able to stay under the regulation radar, insisting that they were advertising, not brokering financial products.The FSC held a meeting in this regard yesterday. Through this meeting, the FSC concluded that financial platforms such as Kakao Pay should be viewed as intermediaries if they intended to sell financial products rather than simply provide product information.The specific business cases of the financial platform are specified below, and all of these actions are categories as brokerage, so business registration is required with the FSC. (The original press release document is attached below.)
The tightening of regulations on financial platforms by the Financial Services Commission is the cause of the sharp decline in the stock prices of Kakao and Naver today.

FSC's Sudden Action on Local Financial Platforms: A Fatal Blow to Kakao Pay's IPO Valuation

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Taiwan Semiconductor (TSMC) / Technical Analysis

<p>Emerging market equities have been one of the worst areas to invest in 2021, but we see early signs of positive change. With the US dollar failing to break above resistance at $93.50 and the MSCI EM ETF (EEM-US) displaying a false breakdown at $52, we believe now is an opportune time to add exposure to emerging market equities. To be clear, we are not getting overly bullish on EM; we have favored developed int’l (EAFE) over EM since May, and we are now shifting back to a neutral stance between the two. We see reason to believe the tide is shifting in EM’s favor. Below we highlight attractive and actionable themes within EM.</p>

Emerging market equities have been one of the worst areas to invest in 2021, but we see early signs of positive change. With the US dollar failing to break above resistance at $93.50 and the MSCI EM ETF (EEM-US) displaying a false breakdown at $52, we believe now is an opportune time to add exposure to emerging market equities. To be clear, we are not getting overly bullish on EM; we have favored developed int’l (EAFE) over EM since May, and we are now shifting back to a neutral stance between the two. We see reason to believe the tide is shifting in EM’s favor. Below we highlight attractive and actionable themes within EM.

Shifting Exposure To Emerging Markets; Buying TSMC/Taiwan Semi, ICICI Bank, Many Others

<p>Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.</p><p>As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.</p><p>Since spinning out from Kakao in 2017, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. </p><p>Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.</p><p>We have covered most aspects of the deal in our earlier note, <a href="https://www.smartkarma.com/insights/kakao-pay-ipo-guided-by-ant-financial-to-be-a-mini-ant" target="_blank" rel="noopener">Kakao Pay IPO - Guided by Ant Financial to be a mini Ant</a>.</p><p>In this note we will undertake a peer comparison.</p>

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.Since spinning out from Kakao in 2017, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.We have covered most aspects of the deal in our earlier note, Kakao Pay IPO - Guided by Ant Financial to be a mini Ant.In this note we will undertake a peer comparison.

Kakao Pay IPO - Peer Comparison - Local and International

South Korea

Naver Corp. provides Internet site with web portal services, such as search engine, online game and content development.  The Company also offers marketing service through text and banner advertisement.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Naver Corp (035420 KS)

Kakao Pay IPO - Valuation and Likely Impact of Latest Announcement

Kakao Pay, one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55%...

Sumeet Singh

The Korean Government Could Follow the Chinese Government in Cracking Down on the Internet Giants

The Korean government which is trying to crack down on the two key Internet giants in Korea is similar to how the Chinese government is trying to...

Douglas Kim

FSC's Sudden Action on Local Financial Platforms: A Fatal Blow to Kakao Pay's IPO Valuation

This post details the FSC's surprising action on the business practices of local financial platforms and discusses why a major correction in Kakao...

Sanghyun Park

Shifting Exposure To Emerging Markets; Buying TSMC/Taiwan Semi, ICICI Bank, Many Others

We see early signs of positive change within EM, and we present a strong case as to why we believe now is an opportune time to add exposure.

Vermilion Research

Kakao Pay IPO - Peer Comparison - Local and International

Kakao Pay, one of South Korea’s largest payment apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to...

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)