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 Capital Markets

<p>In a regulatory filing on July 16 (later today), the Financial Supervisory Service said that it had requested Kakao Pay to revise its IPO prospectus. As a result, the IPO prospectus submitted by Kakao Pay earlier this month has been suspended.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/218/913/original/Screen+Shot+2021-07-16+at+10.12.05+AM.png?1626444842" class="editor-image img-responsive" data-smartkarma-image-id="218913"></figure></section><p>Kakao Pay must submit a revised report within three months, and if it is not submitted, it is considered a withdrawal of the public offering.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/218/914/original/Screen+Shot+2021-07-16+at+10.20.56+AM.png?1626445364" class="editor-image img-responsive" data-smartkarma-image-id="218914"></figure><div class="content-highlight"><p><a href="http://dart.fss.or.kr/dsaf001/main.do?rcpNo=20210716100004" target="_blank" rel="noopener">Here is the link to the regulatory filing. (DART)</a></p></div></section>

In a regulatory filing on July 16 (later today), the Financial Supervisory Service said that it had requested Kakao Pay to revise its IPO prospectus. As a result, the IPO prospectus submitted by Kakao Pay earlier this month has been suspended.Kakao Pay must submit a revised report within three months, and if it is not submitted, it is considered a withdrawal of the public offering.Here is the link to the regulatory filing. (DART)

Kakao Pay to Revise Offering Price: Reasons & Schedule Impacts on Kakao Bank & Krafton

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.

Event-Driven

<div><p>Kakao Bank (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao held a 31.62% stake prior to listing.</p></div><div><p>Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea. KB’s loans have grown by 138% over 2018 to 1Q21 to reach KRW21.6tn, while its deposits have grown by 197% over the same period to reach KRW24.2tn. </p></div><div><p>Over 2018-20, its total income (Net interest income plus net fee income) grew by 216%, while it went from booking a loss in 2018 to reporting a 26% profit margin by 2020. KB’s total income was up another 60% YoY in 1Q21, while PAT was up 153% YoY.</p></div><div><p>We have covered various aspects of the deal in our previous notes, <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-riding-on-parent-s-network-but-boundaries-with-kakao-pay-remain-unclear" target="_blank" rel="noopener">Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear</a> and <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-pricey-as-it-should-be" target="_blank" rel="noopener">Kakao Bank IPO - Pricey as It Should Be</a>.</p></div><div><p>In this note, we will talk about out the what the lack of lock-up on some investors could mean for index inclusion.</p></div>

Kakao Bank (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao held a 31.62% stake prior to listing.Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea. KB’s loans have grown by 138% over 2018 to 1Q21 to reach KRW21.6tn, while its deposits have grown by 197% over the same period to reach KRW24.2tn. Over 2018-20, its total income (Net interest income plus net fee income) grew by 216%, while it went from booking a loss in 2018 to reporting a 26% profit margin by 2020. KB’s total income was up another 60% YoY in 1Q21, while PAT was up 153% YoY.We have covered various aspects of the deal in our previous notes, Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear and Kakao Bank IPO - Pricey as It Should Be.In this note, we will talk about out the what the lack of lock-up on some investors could mean for index inclusion.

Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications

<p>Kakao Bank (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao held a 31.62% stake prior to listing.</p><p>Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea. KB’s loans have grown by 138% over 2018 to 1Q21 to reach KRW21.6tn, while its deposits have grown by 197% over the same period to reach KRW24.2tn. </p><p>Over 2018-20, its total income (Net interest income plus net fee income) grew by 216%, while it went from booking a loss in 2018 to reporting a 26% profit margin by 2020. KB’s total income was up another 60% YoY in 1Q21, while PAT was up 153% YoY.</p><p>We have covered various aspects of the deal in our previous note, <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-riding-on-parent-s-network-but-boundaries-with-kakao-pay-remain-unclear" target="_blank" rel="noopener">Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear</a>.</p><p>In this note, we will talk about our earnings estimates and valuation and other issues that will impact the deal.</p>

Kakao Bank (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao held a 31.62% stake prior to listing.Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea. KB’s loans have grown by 138% over 2018 to 1Q21 to reach KRW21.6tn, while its deposits have grown by 197% over the same period to reach KRW24.2tn. Over 2018-20, its total income (Net interest income plus net fee income) grew by 216%, while it went from booking a loss in 2018 to reporting a 26% profit margin by 2020. KB’s total income was up another 60% YoY in 1Q21, while PAT was up 153% YoY.We have covered various aspects of the deal in our previous note, Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear.In this note, we will talk about our earnings estimates and valuation and other issues that will impact the deal.

<p>Kakao's two financial affiliates, Kakao Bank and Kakao Pay, are about to go public at the same time next month. As of the listing date, there is an interval of only one week.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"IPO schedule"}'>IPO schedule</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Kakao Bank"}'>Kakao Bank</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Kakao Pay"}'>Kakao Pay</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44413}' data-sheets-numberformat='{"1":5,"2":"mm. dd","3":1}'><strong>08. 05</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44420}' data-sheets-numberformat='{"1":5,"2":"mm. dd","3":1}'><strong>08. 12</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p><strong>This poses a dilemma for local institutional investors. This is because if institutions hold both at their originally allocated weight, risk exposure to a specific sector (financial industry) and a specific corporate group (Kakao Group) will suddenly increase.</strong></p><p>In fact, concerns are being raised that the business scope of Kakao Bank and Kakao Pay may overlap too much. Although their current main business is different, they are aiming for almost the same business direction to expand into a comprehensive financial platform through a medium called Kakao Talk.</p><div class="content-highlight"><ul>
<li>The symbolic point of conflict in the evolution of business areas is the MyData Project that the government is promoting. MyData is a business that provides customized financial services by collecting personal credit information scattered across banks, insurance companies, and credit card companies.</li>
<li>Kakao Bank has decided to launch its own MyData business and is preparing to apply for a license for this. Kakao Pay has already obtained a preliminary business license for MyData.</li>
</ul></div><p><strong>As such, this overlapping business area in the not-too-distant future worsens the severity of risk exposure to the same sector/corporate group.</strong></p>

Kakao's two financial affiliates, Kakao Bank and Kakao Pay, are about to go public at the same time next month. As of the listing date, there is an interval of only one week.







IPO schedule
Kakao Bank
Kakao Pay


Listing
08. 05
08. 12

Source: DART &amp; KRX

This poses a dilemma for local institutional investors. This is because if institutions hold both at their originally allocated weight, risk exposure to a specific sector (financial industry) and a specific corporate group (Kakao Group) will suddenly increase.In fact, concerns are being raised that the business scope of Kakao Bank and Kakao Pay may overlap too much. Although their current main business is different, they are aiming for almost the same business direction to expand into a comprehensive financial platform through a medium called Kakao Talk.
The symbolic point of conflict in the evolution of business areas is the MyData Project that the government is promoting. MyData is a business that provides customized financial services by collecting personal credit information scattered across banks, insurance companies, and credit card companies.
Kakao Bank has decided to launch its own MyData business and is preparing to apply for a license for this. Kakao Pay has already obtained a preliminary business license for MyData.
As such, this overlapping business area in the not-too-distant future worsens the severity of risk exposure to the same sector/corporate group.

Kakao Bank & Kakao Pay Listings in Close Proximity: Institutional Cannibalization Risk

<p><a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (1349010D KS)</a> (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> held a 31.62% stake prior to listing.</p><p>Kakao Bank is a digital-bank which counts Kakao as its main shareholder. It is a branchless digital bank that only started operations in 2017. As of Mar 21, it had a loan book of US$18.8bn, deposit base of US$21.1bn. It had 16.5m customers as of May 21.</p>

KakaoBank (1349010D KS) (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao Corp (035720 KS) held a 31.62% stake prior to listing.Kakao Bank is a digital-bank which counts Kakao as its main shareholder. It is a branchless digital bank that only started operations in 2017. As of Mar 21, it had a loan book of US$18.8bn, deposit base of US$21.1bn. It had 16.5m customers as of May 21.

Kakao Bank IPO - Riding on Parent's Network but Boundaries with Kakao Pay Remain Unclear

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.

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

KakaoBank (323410 KS)

Kakao Pay to Revise Offering Price: Reasons & Schedule Impacts on Kakao Bank & Krafton

In a regulatory filing on July 16, the Financial Supervisory Service said that it had requested Kakao Pay to revise its IPO prospectus.

Sanghyun Park

Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications

Kakao Bank (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao held a 31.62% stake prior to listing.

Sumeet Singh

Kakao Bank IPO - Pricey as It Should Be

Kakao Bank (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao held a 31.62% stake prior to listing.

Sumeet Singh

Kakao Bank & Kakao Pay Listings in Close Proximity: Institutional Cannibalization Risk

This post discusses local institutional investors' dilemma resulting from the fact that Kakao Bank and Kakao Pay's listing dates are close to each...

Sanghyun Park

Kakao Bank IPO - Riding on Parent's Network but Boundaries with Kakao Pay Remain Unclear

KakaoBank (1349010D KS) (KB), South Korea’s largest digital bank, aims to raise up to US$2.2bn in its South Korean IPO. Kakao Corp (035720 KS) held...

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)