Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p>In our view, there is a relatively high probability that <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a> will follow <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> in forming a holding company structure. Although the exact timing is uncertain, we think that KT could make this announcement by 2022/2023.</p><p><strong>3 Major Reasons Why KT is Likely to Change to a Holding Company Structure:</strong></p><ul>
<li>Greater importance of non-telecom business (realize higher valuations) </li>
<li>Bypass the 49% foreign ownership limit specific to the telecom business (greater importance of index investing)</li>
<li>Follow SK Telecom (less resistance from major investors)</li>
</ul><p>Despite KT's stock price rising more than 30% YTD, KT is still trading at only 0.5x P/B. By forming a holding company structure and split the company's business into telecom and non-telecom business units, we believe that there likely to be a higher value realization for the company.</p>

In our view, there is a relatively high probability that KT Corp (030200 KS) will follow SK Telecom (017670 KS) in forming a holding company structure. Although the exact timing is uncertain, we think that KT could make this announcement by 2022/2023.3 Major Reasons Why KT is Likely to Change to a Holding Company Structure:
Greater importance of non-telecom business (realize higher valuations) 
Bypass the 49% foreign ownership limit specific to the telecom business (greater importance of index investing)
Follow SK Telecom (less resistance from major investors)
Despite KT's stock price rising more than 30% YTD, KT is still trading at only 0.5x P/B. By forming a holding company structure and split the company's business into telecom and non-telecom business units, we believe that there likely to be a higher value realization for the company.

Three Major Reasons Why KT Corp Is Likely to Change to a Holding Company Structure

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.

Equity Bottom-Up

<p>Short-selling to Kakao Bank is not decreasing. On the contrary, the trend is getting worse. The proportion of short trading in today's total trading volume again hit the 15% level. Today's short VWAP was ₩66,241.</p><div class="content-highlight"><p><strong>Today's closing price was $65,500, which is actually the lowest since listing. Even at this lowest price, short-selling was made quite aggressively.</strong></p></div><p>Today's shorting also has an important meaning in terms of share price trends. Except for September 10, when short selling was allowed, the days with the most short-selling were September 15 and September 16. However, this time, it was a short sale aimed at a price surge right after the share price rose by almost 8% on September 14.</p><p>However, today, when the stock price has already fallen for three consecutive days, short-selling has reached the level of more than 15% of the trading volume. Rather than a shorting inflow due to a temporary share price rebound, today's should be seen as a short-selling betting on a structural downward trend in Kakao Bank's share price.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/233/021/original/image_27221576321633093091286.png?1633093093" class="editor-image img-responsive" data-smartkarma-image-id="233021"></figure><p>The daily loan balance (new vs. repaid) below also has interesting implications. Yesterday (September 30), there was a significant level of repayment. There were loan repayments of over 1M, the highest level since short selling was allowed. Yesterday's closing price was ₩68,400, and yesterday's repayment can be interpreted as a partial liquidation of short positions betting on short-term stock price volatility after listing.</p><p>However, it is worth noting that today's share price has been sufficiently corrected; still, new loans are close to 700K. So, the loan balance returned to close to 15M again. This can be another evidence suggesting a new influx of short-sellers aiming for a structural downturn in Kakao Bank's fundamentals instead of betting on short-term price volatility.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Date"}'>Date</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Newly loaned shares"}'>Newly loaned shares</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Loaned shares repaid"}'>Loaned shares repaid</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Loan balance"}'>Loan balance</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Short interest"}'>Short interest</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Loan balance/Short interest"}'>Loan balance/Short interest</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44449}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 10</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3150200}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,150,200</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":546907}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>546,907</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6940058}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>6,940,058</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1330825}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,330,825</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.214853943982116}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">5.21x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44452}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 13</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2626620}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>2,626,620</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":216381}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>216,381</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9350297}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>9,350,297</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1621216}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,621,216</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5.767459117107159}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">5.77x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44453}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 14</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2605990}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>2,605,990</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":453409}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>453,409</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":11502878}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>11,502,878</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2344735}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>2,344,735</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.905832855312007}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.91x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44454}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 15</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1164047}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,164,047</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":68003}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>68,003</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12598922}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>12,598,922</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2912744}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>2,912,744</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.3254477564798}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.33x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44455}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 16</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1231797}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,231,797</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":156382}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>156,382</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13674337}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>13,674,337</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3326154}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,326,154</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.1111557071620854}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.11x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44456}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 17</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":609292}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>609,292</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":263228}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>263,228</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":14020401}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>14,020,401</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3363456}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,363,456</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.168450843418198}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.17x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44462}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 23</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":262003}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>262,003</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":599445}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>599,445</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13682959}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>13,682,959</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3375519}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,375,519</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.053586722515856}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.05x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44463}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 24</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1513289}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,513,289</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":256602}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>256,602</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":14939646}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>14,939,646</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3229657}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,229,657</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.625768618772829}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.63x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44466}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 27</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1165155}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,165,155</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":617393}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>617,393</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15487408}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>15,487,408</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3282877}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,282,877</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.717632734945598}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.72x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44467}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 28</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":151094}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>151,094</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":318789}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>318,789</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15319713}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>15,319,713</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3317155}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,317,155</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.618328959605445}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.62x</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44468}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'>9. 29</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":256811}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>256,811</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":309072}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>309,072</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15267452}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>15,267,452</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3455668}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,455,668</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4.418089932250436}' data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}' data-sheets-formula="=R[0]C[-2]/R[0]C[-1]">4.42x</td>
</tr>
<tr><td colspan="6"></td></tr>
<tr>
<td data-sheets-value='{"1":3,"3":44469}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'><strong>9. 30</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":568014}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>568,014</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1178857}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>1,178,857</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":14656609}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>14,656,609</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>-</strong></td>
<td style="text-align: right;" data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}'><strong>- </strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44470}' data-sheets-numberformat='{"1":5,"2":"m\". \"d","3":1}'><strong>10. 1</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":655302}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>655,302</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":463995}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>463,995</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":14847916}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>14,847,916</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>-</strong></td>
<td style="text-align: right;" data-sheets-numberformat='{"1":2,"2":"#,##0.00x","3":1}'><strong>- </strong></td>
</tr>
<tr><td colspan="6" data-sheets-value='{"1":2,"2":"Source: KOFIA &amp; KRX"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>Source: KOFIA &amp; KRX</td></tr>
</tbody>
</table>

Short-selling to Kakao Bank is not decreasing. On the contrary, the trend is getting worse. The proportion of short trading in today's total trading volume again hit the 15% level. Today's short VWAP was ₩66,241.Today's closing price was $65,500, which is actually the lowest since listing. Even at this lowest price, short-selling was made quite aggressively.Today's shorting also has an important meaning in terms of share price trends. Except for September 10, when short selling was allowed, the days with the most short-selling were September 15 and September 16. However, this time, it was a short sale aimed at a price surge right after the share price rose by almost 8% on September 14.However, today, when the stock price has already fallen for three consecutive days, short-selling has reached the level of more than 15% of the trading volume. Rather than a shorting inflow due to a temporary share price rebound, today's should be seen as a short-selling betting on a structural downward trend in Kakao Bank's share price.The daily loan balance (new vs. repaid) below also has interesting implications. Yesterday (September 30), there was a significant level of repayment. There were loan repayments of over 1M, the highest level since short selling was allowed. Yesterday's closing price was ₩68,400, and yesterday's repayment can be interpreted as a partial liquidation of short positions betting on short-term stock price volatility after listing.However, it is worth noting that today's share price has been sufficiently corrected; still, new loans are close to 700K. So, the loan balance returned to close to 15M again. This can be another evidence suggesting a new influx of short-sellers aiming for a structural downturn in Kakao Bank's fundamentals instead of betting on short-term price volatility.










Date
Newly loaned shares
Loaned shares repaid
Loan balance
Short interest
Loan balance/Short interest


9. 10
3,150,200
546,907
6,940,058
1,330,825
5.21x


9. 13
2,626,620
216,381
9,350,297
1,621,216
5.77x


9. 14
2,605,990
453,409
11,502,878
2,344,735
4.91x


9. 15
1,164,047
68,003
12,598,922
2,912,744
4.33x


9. 16
1,231,797
156,382
13,674,337
3,326,154
4.11x


9. 17
609,292
263,228
14,020,401
3,363,456
4.17x


9. 23
262,003
599,445
13,682,959
3,375,519
4.05x


9. 24
1,513,289
256,602
14,939,646
3,229,657
4.63x


9. 27
1,165,155
617,393
15,487,408
3,282,877
4.72x


9. 28
151,094
318,789
15,319,713
3,317,155
4.62x


9. 29
256,811
309,072
15,267,452
3,455,668
4.42x



9. 30
568,014
1,178,857
14,656,609
-
- 


10. 1
655,302
463,995
14,847,916
-
- 

Source: KOFIA &amp; KRX



<div class="content-highlight">
<p><a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a>'s stock price declined by 4.2% today to 65,500 won, driven lower by<a href="https://finance.naver.com/item/main.naver?code=323410" target="_blank" rel="noopener"> news</a> about a sharp increase in voice phishing and higher fraudulent accounts. From the launch of the Internet banks in 2017 to 2020, the number of <a href="https://www.edaily.co.kr/news/read?newsId=02309126629208656&amp;mediaCodeNo=257&amp;OutLnkChk=Y" target="_blank" rel="noopener">fraudulent accounts</a> at Internet banks (Kakao Bank and K-Bank) increased significantly while the number of fraudulent accounts at the existing commercial banks declined in this period. </p>
<p><strong>The number of suspended fraudulent accounts at Kakao Bank increased from 199 in 2017 to 2,705 in 2020, up more than 13x. </strong>This figure was 2,025 in 1H 2021, which was 75% of the entire fraudulent accounts in 2020. </p>
</div><p>While Toss Bank is aggressively trying to gain new customers with its attractive loans and deposit rates, <a href="https://www.yonhapnewstv.co.kr/news/MYH20211001016500641?did=1825m" target="_blank" rel="noopener">Kakao Bank</a> announced that it will temporarily suspend negative loans from 1 October to 31 December 2021. The suspension of the negative loans is part of Kakao Bank's efforts to better control the growth rate of household loans.</p>


KakaoBank (323410 KS)'s stock price declined by 4.2% today to 65,500 won, driven lower by news about a sharp increase in voice phishing and higher fraudulent accounts. From the launch of the Internet banks in 2017 to 2020, the number of fraudulent accounts at Internet banks (Kakao Bank and K-Bank) increased significantly while the number of fraudulent accounts at the existing commercial banks declined in this period. 
The number of suspended fraudulent accounts at Kakao Bank increased from 199 in 2017 to 2,705 in 2020, up more than 13x. This figure was 2,025 in 1H 2021, which was 75% of the entire fraudulent accounts in 2020. 
While Toss Bank is aggressively trying to gain new customers with its attractive loans and deposit rates, Kakao Bank announced that it will temporarily suspend negative loans from 1 October to 31 December 2021. The suspension of the negative loans is part of Kakao Bank's efforts to better control the growth rate of household loans.

Kakao Bank - A Sharp Increase in Fraudulent Accounts

Telco/Internet specialist

Kirk Boodry

Redex Research

<p>Rakuten announced today it would both prepare for a potential listing of Rakuten Bank and the incorporation of Symphony, the mobile network system integrator.  This could represent the next funding step for Rakuten as its mobile network investment accelerates although the news today is preliminary enough to be considered a trial balloon. A Bank listing could surface hidden value as we think fintech represents a majority of Rakuten’s overall value even as mobile and eCommerce grab the headlines. Unfortunately, until mobile turns the corner on operating losses we are unlikely to see a meaningful change in sentiment. We remain at Neutral.</p>

Rakuten announced today it would both prepare for a potential listing of Rakuten Bank and the incorporation of Symphony, the mobile network system integrator.  This could represent the next funding step for Rakuten as its mobile network investment accelerates although the news today is preliminary enough to be considered a trial balloon. A Bank listing could surface hidden value as we think fintech represents a majority of Rakuten’s overall value even as mobile and eCommerce grab the headlines. Unfortunately, until mobile turns the corner on operating losses we are unlikely to see a meaningful change in sentiment. We remain at Neutral.

Rakuten Group (Neutral) - Testing the Waters on Further Funding

Equity Capital Markets

<h2>Key revisions</h2><p>Kakao Pay submitted a revised registration statement (prospectus) on Friday afternoon. It plans to start bookbuilding on October 20-21 and subscription on the 25th. It then plans to go public in early November (tentatively November 3rd). However, Kakao Pay did not change the offering price.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/611/original/2.png?1632487425" class="editor-image img-responsive" data-smartkarma-image-id="231611"></figure></section><p>The grace period for the registration statement to take effect is 15 business days. During this period, the Financial Supervisory Service (FSS) will undergo a final review. An issuer cannot do marketing during the grace period. After 15 business days from today (September 24th), it becomes October 20th. So, the start date of bookbuilding was decided on October 20th.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/612/original/1.png?1632487478" class="editor-image img-responsive" data-smartkarma-image-id="231612"></figure></section><p>Contrary to expectations, Kakao Pay maintained its offering price at 60,000-90,000 won as before. The market capitalization based on the top of the indicative price band is 11.73 trillion won. The institutional allocation rate remains the same at 55-75%.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/613/original/3.png?1632487969" class="editor-image img-responsive" data-smartkarma-image-id="231613"></figure></section><p>Kakao Pay added government regulatory risk to this revised report. It stated that it had suspended those services that violated the Financial Consumer Protection Act (the services concluded as financial product brokerage, not advertising).</p><p>However, Kakao Pay explained that the portion of sales of the discontinued services was only 1.2% of the total sales. Therefore, Kakao Pay said it did not feel the need to change its IPO valuation (the offering price).</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/614/original/4.png?1632488385" class="editor-image img-responsive" data-smartkarma-image-id="231614"></figure></section>

Key revisionsKakao Pay submitted a revised registration statement (prospectus) on Friday afternoon. It plans to start bookbuilding on October 20-21 and subscription on the 25th. It then plans to go public in early November (tentatively November 3rd). However, Kakao Pay did not change the offering price.The grace period for the registration statement to take effect is 15 business days. During this period, the Financial Supervisory Service (FSS) will undergo a final review. An issuer cannot do marketing during the grace period. After 15 business days from today (September 24th), it becomes October 20th. So, the start date of bookbuilding was decided on October 20th.Contrary to expectations, Kakao Pay maintained its offering price at 60,000-90,000 won as before. The market capitalization based on the top of the indicative price band is 11.73 trillion won. The institutional allocation rate remains the same at 55-75%.Kakao Pay added government regulatory risk to this revised report. It stated that it had suspended those services that violated the Financial Consumer Protection Act (the services concluded as financial product brokerage, not advertising).However, Kakao Pay explained that the portion of sales of the discontinued services was only 1.2% of the total sales. Therefore, Kakao Pay said it did not feel the need to change its IPO valuation (the offering price).

Kakao Pay IPO Revised Prospectus Out: Key Revisions & Talking Points

South Korea

KakaoBank Corp. operates bank businesses. The Company provides deposit money, withdraw money, credit cards, stock accounts, linked loans, and other services. KakaoBank conducts businesses in South Korea.

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KakaoBank (323410 KS)

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