Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

On 11 May, <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> announced that its affiliate Kakao Entertainment Corp was acquiring US based Tapas and Radish for $510 million and $440 million, respectively. Kakao Entertainment is one of the largest providers of webtoons in Korea and Japan. Tapas provides an online comic app. Radish is a storytelling fiction app. Radish previously received Series A funding from investors including SoftBank Group's venture arm 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>.The acquisition of Tapas and Radish is likely to accelerate the IPO of Kakao Entertainment which could occur in 2022. <a href="https://www.reuters.com/technology/skoreas-kakao-entertainment-acquire-serial-fiction-app-radish-440-mln-2021-05-11/" target="_blank" rel="noopener">Kakao Entertainment</a> plans to capitalize on these acquisitions to further expand in the North American market. These purchases of US content companies follow recent acquisitions of US based Ithaca Holdings by HYBE (Big Hit Entertainment) for $1.05 billion and <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>'s acquisition of Canada based Wattpad for $600 million. Despite these acquisitions, there are some concerns about Kakao Entertainment potentially overpaying for them. While we believe that these acquisitions are likely to have long-term positive impact on Kakao Entertainment 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>, we are concerned about the valuations of Kakao Corp which is currently trading at 66x P/E (2021), close to the high end of the historical valuation multiples in the past five years.

On 11 May, Kakao Corp (035720 KS) announced that its affiliate Kakao Entertainment Corp was acquiring US based Tapas and Radish for $510 million and $440 million, respectively. Kakao Entertainment is one of the largest providers of webtoons in Korea and Japan. Tapas provides an online comic app. Radish is a storytelling fiction app. Radish previously received Series A funding from investors including SoftBank Group's venture arm and Kakao Corp (035720 KS).The acquisition of Tapas and Radish is likely to accelerate the IPO of Kakao Entertainment which could occur in 2022. Kakao Entertainment plans to capitalize on these acquisitions to further expand in the North American market. These purchases of US content companies follow recent acquisitions of US based Ithaca Holdings by HYBE (Big Hit Entertainment) for $1.05 billion and Naver Corp (035420 KS)'s acquisition of Canada based Wattpad for $600 million. Despite these acquisitions, there are some concerns about Kakao Entertainment potentially overpaying for them. While we believe that these acquisitions are likely to have long-term positive impact on Kakao Entertainment and Kakao Corp (035720 KS), we are concerned about the valuations of Kakao Corp which is currently trading at 66x P/E (2021), close to the high end of the historical valuation multiples in the past five years.  

Kakao Entertainment - Buys US Based Tapas & Radish to Get Ready for an IPO in 2022

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.

Last week's biggest story would be Kakao, whose loan balance gained 2.25%p, the biggest among the KOSPI stocks.













Top 20 loan balance gainers
Ticker
K200
Short
1W Δ
1W Δ %p
Loan
1W Δ
1W Δ %p


Kakao Corp
035720
9
0.02%
-4.87%
0.00%p
2.89%
351.07%
2.25%p


Daesang Corp
001680
164
0.06%
-23.43%
-0.02%p
3.17%
123.13%
1.75%p


Digital Power Communications Co., Ltd.
026890
#N/A
0.44%
-34.44%
-0.23%p
2.68%
116.50%
1.44%p


Ilyang Pharmaceutical Co., Ltd
007570
134
0.19%
-3.52%
-0.01%p
2.77%
102.55%
1.40%p


LG HAUSYS, LTD.
108670
168
0.14%
-13.50%
-0.02%p
3.29%
58.38%
1.21%p


Hyundai Heavy Industries Holdings Co Ltd
267250
66
0.17%
411.79%
0.14%p
1.38%
444.91%
1.13%p


TS Corp Preference Shares
001795
#N/A
0.00%
#DIV/0!
0.00%p
1.09%
3959.91%
1.06%p


Binggrae Co Ltd
005180
182
0.11%
0.00%
0.00%p
2.55%
66.92%
1.02%p


AK Holdings Inc
006840
#N/A
0.03%
0.00%
0.00%p
1.21%
505.78%
1.01%p


SC Engineering Co., Ltd.
023960
#N/A
0.00%
#DIV/0!
0.00%p
1.06%
1569.56%
0.99%p


Samil Pharmaceutical Co., Ltd.
000520
#N/A
0.64%
100.00%
0.32%p
1.89%
103.53%
0.96%p


LG Display Co Ltd
034220
41
1.41%
0.40%
0.01%p
6.17%
17.69%
0.93%p


SK Networks Co Ltd
001740
154
0.01%
-61.97%
-0.02%p
1.58%
120.18%
0.86%p


Samsung Publishing Co Ltd
068290
#N/A
0.06%
-62.71%
-0.10%p
1.45%
146.53%
0.86%p


KISCO Corp.
104700
#N/A
0.13%
0.00%
0.00%p
1.15%
225.41%
0.80%p


HMM Co Ltd
011200
42
0.09%
-2.66%
0.00%p
4.24%
21.95%
0.76%p


Hyundai Marine &amp; Fire Insurance Co., Ltd
001450
92
0.11%
95.47%
0.05%p
2.42%
41.46%
0.71%p


Posco Chemical Co Ltd
003670
57
0.28%
-11.41%
-0.04%p
2.78%
31.68%
0.67%p


KCTech Co Ltd
281820
#N/A
0.00%
#DIV/0!
0.00%p
1.89%
52.41%
0.65%p


POONGSAN CORPORATION
103140
158
0.05%
-13.97%
-0.01%p
2.19%
40.96%
0.64%p

Source: KRX &amp; KOFIA

Potential shorting seems to be lurking on Kakao's stock split-driven recent bounce. Local retail has fueled the bounce, making it an ideal target of short-selling.Kakao was the second most-bought stock by local retail last week by trading value. 1.03% of the SO and 1.02% of the MC had found new owners among local retail.










Local retail weekly top 10
Ticker
Trading vol
% of SO
Trading value (₩)
% of MC


Samsung Electronics Co Ltd
005930
10,414,800
0.17%
871,760,979,700
0.16%


Kakao Corp
035720
4,573,289
1.03%
547,825,413,400
1.02%


SK Hynix Inc
000660
2,449,023
0.34%
338,060,885,500
0.34%


HYUNDAI MOBIS CO., LTD.
012330
503,443
0.53%
153,238,878,000
0.53%


Lotte Chemical Corp
011170
494,836
1.44%
142,573,014,000
1.44%


Samsung Electronics Co Ltd Preference Shares Non Voting
005935
1,193,020
0.14%
89,537,648,000
0.02%


Samsung Electro-Mechanics Co., Ltd.
009150
330,262
0.44%
62,774,585,500
0.42%


Hybe Co Ltd
352820
246,973
0.69%
60,408,601,500
0.65%


Hotel Shilla Co Ltd
008770
603,222
1.54%
50,732,284,100
1.52%


Celltrion, Inc.
068270
161,278
0.13%
49,662,542,500
0.12%

Source: KRX

The shares continue to outperform the market. 20D Δ sits at 21.49%, pushing up 120D Δ to 71.15%.On the other hand, the street consensus on this year's earnings has been on the decline.It is now down 6.25% from T-3M, resulting in a 32.86% increase in 12M PER, which currently sits at 79.60x, easily a historic high.










Kakao Corp
2021. 4. 19
T-1M
T-3M
T-6M
T-1Y


Sales
5,579.1
5,533.0
5,364.2
4,923.7
4,392.2


OP
779.8
776.4
763.2
681.4
535.5


NP to controlling stake
577.3
584.3
615.8
546.3
399.4


EPS (₩)
1,301
6,587
6,958
6,190
4,593


PER (x)
91.50
75.60
61.40
57.80
37.50


12M PER (x)
79.60
68.24
59.91
60.34
45.84


TP (₩)
122,157
112,575
99,008
86,917
43,267

Source: FnGuide







Kakao Corp

Ticker
035720


MC (₩B)
53,700.9


DTV (₩B)
357.9


Close
₩121,000


52WH
-8.68%


- Date
4/15/21


52WL
259.05%


- Date
4/21/20


20D SMA
16.09%


20D EMA
13.48%


120D SMA
40.22%


20D Δ
21.49%


120D Δ
71.15%


180D Δ
90.25%


RSI (14)
80.59


%K
67.61


%D
65.66

Source: KRX

We are now two weeks away from the short-selling resumption.Loan balance can be a leading indicator. Kakao's loan balance, 2.89% of the SO, may not seem at an alarming level.But given the valuation resistance and local retail-heavy buying pattern, Kakao will likely draw a lot of attention as one of the first short-selling targets in early May if last week's upward trend repeats. 

Kakao, Biggest Gain in Loan Balance Among KOSPI on Valuation Concern Ahead of May 3

Pearl Abyss resumes trading today after a 3-day suspension due to a 1:5 stock split.The float is 41.72% at a post-split SO of 65.9M. The FO sits at 23.88% with a DTV of 0.27% SO. 30D avg x Open is 3.64%p.The base price is ₩67,300 at an MC of ₩4.35T.





PearlAbyss Corp

Ticker
263750


Stock split
1 to 5


Pre-split SO
13,235,600


Post-split SO
65,949,250


Float
41.72%


FO
23.88%30


30D DTV/SO
0.27%


30D avg x Open
3.64%p


Trading resumption
2021. 4. 16


- Suspension period
3 sessions


MC (₩B)
4,353.8


Base
₩67,300

Source: KRX

Reviewing Kakao post-split d-dayNow, look at Kakao's early morning momentum trading yesterday.Kakao also underwent a 1:5 stock split only one day ahead of Pearl Abyss.The float is 71.86% at a post-split SO of 443.8M. The FO sits at 34.15% with a DTV of 0.63% SO.As can be seen, Kakao is more liquid than Pearl Abyss, but daily price volatility is lower as 30D avg x Open is 2.64%p.The base price is ₩67,300 at an MC of ₩4.35T.





Kakao Corp

Ticker
035720


Stock split
1 to 5


Pre-split SO
88,704,620


Post-split SO
443,809,305


Float
71.86%


FO
34.15%


30D DTV/SO
0.63%


30D avg. x Open
2.85%


Trading resumption
2021. 4. 15


- Suspension period
3 sessions

Source: KRX

The base was ₩112,000 on the post-split d-day, April 15.The gap was 7.97% from the previous session as the price opened at ₩120,500. It then quickly soared to ₩132,500, a 10% flash gain in the very early morning.





Kakao Corp on post-split d-day (April 15)

Ticker
035720


MC (₩B)
53,479.0


x DTV
6.11x


TV
16,940,427.0


TV/SO
3.82%


Base
₩112,000


Close
₩120,500


Open
₩120,500


High
₩132,500


Low
₩118,000


Δ Daily
7.97%


Gap
7.97%


x Open
12.03%p


Open-High
9.96%


U Wick
-82.76%


Body
0.00%


D Wick
17.24%

Source: KRX

The benchmark (KOSPI 200) rose 1.51% during the 3-day suspension. Kakao's 1W and 1M yields were 11.38% and 21.30%, respectively.The local street consensus on 12M forward PER has risen by 14.29% MoM. 





Kakao Corp

Ticker
035720


K200 during the suspension
1.51%


52WH
₩112,200


- % to current
-0.53%


- Date
2021. 4. 9


52WL
₩31,813


- % to current
250.80%


- Date
2020. 4. 16


1W yield
11.38%


1M yield
21.30%

Source: KRX












Kakao Corp
2021. 4. 16
T-1M
T-3M
T-6M
T-1Y


Sales
5,559.3
5,529.1
5,354.6
4,925.6
4,390.1


OP
777.2
775.5
757.8
682.8
539.2


NP to controlling stake
573.0
585.8
610.9
544.0
403.9


EPS (₩)
6,456
6,604
6,902
6,164
4,644


PER (x)
86.40
72.80
65.40
59.80
34.30


12M PER (x)
75.10
65.71
63.63
62.46
42.01


TP (₩)
558,364
561,208
486,240
434,583
215,174

Source: FnGuide



Pearl Abyss Post-Split D-Day Momentum Trading, Reflecting Kakao D-Day Movement

APAC IPOs & Placements

Zhen Zhou, Toh

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

Kakao's founder, Kim Beom-Su, is looking sell about US$450m worth of shares. In this note, we will share our thoughts and run the deal through our ECM framework.  We have covered earlier placements in:<ul>
<li>
<a href="https://www.smartkarma.com/insights/kakao-corp-placement-a-quick-trade-post-solid-4q-results" target="_blank" data-smartkarma-citation="insights:29848" rel="noopener">Kakao Corp Placement - A Quick Trade Post Solid 4Q Results</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/kakao-corp-placement-poor-track-and-seems-to-be-an-unexpected-deal" target="_blank" data-smartkarma-citation="insights:9804" rel="noopener">Kakao Corp Placement - Poor Track Record and Seems to Be an Unexpected Deal</a> </li>
</ul>

Kakao's founder, Kim Beom-Su, is looking sell about US$450m worth of shares. In this note, we will share our thoughts and run the deal through our ECM framework.  We have covered earlier placements in:

Kakao Corp Placement - A Quick Trade Post Solid 4Q Results 

Kakao Corp Placement - Poor Track Record and Seems to Be an Unexpected Deal 


Kakao Corp Placement - Selldown by Founder

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> is Southeast Asia’s leading super-app and the largest online delivery platform, ride-hailing platform and digital wallet payments platform in Southeast Asia, according to Euromonitor. Grab intends to go public in the US through a SPAC merger with <a href="https://www.smartkarma.com/entities/altimeter-growth-corp" target="_blank" data-smartkarma-citation="entities:33007:1" rel="noopener">Altimeter Growth Corp (AGC US)</a>.In <a href="https://www.smartkarma.com/insights/grab-spac-deal-delivering-the-goods" target="_blank" data-smartkarma-citation="insights:50305" rel="noopener">Grab SPAC Deal: Delivering the Goods</a>, we looked at Grab's fundamentals and management forecasts. We noted that Grab is using its super-app status to deliver high-growth with declining loss margin and cash burn. While certain management forecasts seem bullish, the overall forecasts are not outlandish.  In this note, we look at the valuation. As a reminder, the deal values Grab at a post-money market cap of $39.6 billion and post-money EV of $31.3 billion. The deal implies 9.6x 2022 EV/Sales based on Grab’s forecasted adjusted net revenue.<div class="content-highlight">
At first glance, Grab's implied multiples are eye-watering in comparison to global peers related to its delivery and mobility businesses. However, we think that judging Grab's multiples based on such peers is missing the point. Grab's key competitive advantage and investor pitch is that it can be credibly billed as a super-app rather than just a leading app in a narrow market category.
Super-apps tend to be rare and investors are starved of publicly listed opportunities. With the regulatory heat turned up on the Chinese super-apps, alternative super-app plays in Asia are likely to be in demand. When judged against global super-apps, Grab's implied multiples seems more justifiable for its forecast growth.  
</div>

Grab (0967655D SP) is Southeast Asia’s leading super-app and the largest online delivery platform, ride-hailing platform and digital wallet payments platform in Southeast Asia, according to Euromonitor. Grab intends to go public in the US through a SPAC merger with Altimeter Growth Corp (AGC US).In Grab SPAC Deal: Delivering the Goods, we looked at Grab's fundamentals and management forecasts. We noted that Grab is using its super-app status to deliver high-growth with declining loss margin and cash burn. While certain management forecasts seem bullish, the overall forecasts are not outlandish.  In this note, we look at the valuation. As a reminder, the deal values Grab at a post-money market cap of $39.6 billion and post-money EV of $31.3 billion. The deal implies 9.6x 2022 EV/Sales based on Grab’s forecasted adjusted net revenue.
At first glance, Grab's implied multiples are eye-watering in comparison to global peers related to its delivery and mobility businesses. However, we think that judging Grab's multiples based on such peers is missing the point. Grab's key competitive advantage and investor pitch is that it can be credibly billed as a super-app rather than just a leading app in a narrow market category.
Super-apps tend to be rare and investors are starved of publicly listed opportunities. With the regulatory heat turned up on the Chinese super-apps, alternative super-app plays in Asia are likely to be in demand. When judged against global super-apps, Grab's implied multiples seems more justifiable for its forecast growth.  


Grab SPAC Deal: A Sensible Super-App Valuation?

South Korea

Kakao Corp. provides Internet portal services such as news, free e-mail, and leisure information.  The Company also offers cross-platform mobile messaging application that allows users to exchange messages.

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

Kakao Corp (035720 KS)

Kakao Entertainment - Buys US Based Tapas & Radish to Get Ready for an IPO in 2022

On 11 May, Kakao Corp (035720 KS) announced that its affiliate Kakao Entertainment Corp was acquiring US based Tapas and Radish for $510 million...

Douglas Kim

Kakao, Biggest Gain in Loan Balance Among KOSPI on Valuation Concern Ahead of May 3

Kakao's loan balance gained 2.25%p, the biggest among the KOSPI stocks. Kakao will likely draw a lot of attention as one of the first short-selling...

Sanghyun Park

Pearl Abyss Post-Split D-Day Momentum Trading, Reflecting Kakao D-Day Movement

This post examines Pearl Abyss post-split d-day momentum trading after what happened to Kakao on its post-split d-day, which was yesterday.

Sanghyun Park

Kakao Corp Placement - Selldown by Founder

Kakao's founder, Kim Beom-Su, is looking sell about US$450m worth of shares. In this note, we will share our thoughts and run the deal through our...

Zhen Zhou, Toh

Grab SPAC Deal: A Sensible Super-App Valuation?

Grab's implied multiples are eye-watering in comparison to global peers related to its businesses. When judged against other global super-apps,...

Arun George

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)