Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<div class="content-highlight">
<p>On 25 August, it was announced after the market close that <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a> sold additional 1.62 million shares of <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> shares worth 133 billion won. This follows Netmarble's sale of 6 million shares of Kakao Bank for 430 billion won on 10 August. Kakao Bank has 475.1 million shares outstanding so 1.62 million shares sold today account for 0.3% of its outstanding shares.</p>
<p>The fact that Netmarble has an additional 1.6% shares of Kakao Bank, which represents 0.6 trillion won based on current market cap, remains an overhang concern.</p>
<p>Our mid-to-high end valuation of Kakao Bank is implied market cap of 26.8 trillion won to 32.5 trillion won or (56,144 won per share to 67,934 won per share). Our base-to-high end valuation of the company is based on 5.2x to 5.7x P/B multiples using 2021 estimated book value. At the current price of 82,000 won, we believe there is an additional 17% to 32% downside risk to Kakao Bank shares over the next 6-12 months (using the mid-to-high end of the valuation analysis).</p>
</div>


On 25 August, it was announced after the market close that Netmarble Corporation (251270 KS) sold additional 1.62 million shares of KakaoBank (323410 KS) shares worth 133 billion won. This follows Netmarble's sale of 6 million shares of Kakao Bank for 430 billion won on 10 August. Kakao Bank has 475.1 million shares outstanding so 1.62 million shares sold today account for 0.3% of its outstanding shares.
The fact that Netmarble has an additional 1.6% shares of Kakao Bank, which represents 0.6 trillion won based on current market cap, remains an overhang concern.
Our mid-to-high end valuation of Kakao Bank is implied market cap of 26.8 trillion won to 32.5 trillion won or (56,144 won per share to 67,934 won per share). Our base-to-high end valuation of the company is based on 5.2x to 5.7x P/B multiples using 2021 estimated book value. At the current price of 82,000 won, we believe there is an additional 17% to 32% downside risk to Kakao Bank shares over the next 6-12 months (using the mid-to-high end of the valuation analysis).


Netmarble Sells More Kakao Bank Shares Worth 133 Billion Won - Overhang Concerns

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.

<h2>3 key points of the first earnings release</h2><hr><p><strong>Point 1: Kakao Bank recorded ₩116B in net profit in the first half, surpassing last year's annual performance just in half a year.</strong></p><div class="content-highlight"><p>This is an increase of 156.2% from the first half of last year. Net profit for the second quarter was ₩69B, up 158.7% from the second quarter of last year.</p></div><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/268/original/Screen+Shot+2021-08-17+at+3.15.33+AM.png?1629184549" class="editor-image img-responsive" data-smartkarma-image-id="224268"></figure></section><hr>
<p><strong>Point 2: As for Kakao Bank's platform sector growth, stock account opening application services and loans linked to non-banking financial companies (NBFCs) increased by 43% and 51%, respectively, from the end of the previous year.</strong></p>
<div class="content-highlight"><p>This platform sector performance is crucial in determining the possibility of Kakao Bank taking a healthier growth path. And it seems to have robust growth in this area.</p></div>
<section class="figure"><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/295/original/Screen+Shot+2021-08-17+at+4.25.41+AM.png?1629188760" class="editor-image img-responsive" data-smartkarma-image-id="224295"></figure></section></section></section><hr>
<p><strong>Point 3: As of the end of June, Kakao Bank users stood at 16.71 million, an increase of 1.27 million from the end of last year.</strong></p>
<div class="content-highlight">
<p>The increase in new customers of Kakao Bank this year was led by people in their 40s and older. Since launching the service, the percentage of accumulated customers in their 20s and 30s was 54%, but 48% of new customers in the first half of this year are in their 40s and 50s.</p>
<p>This is a very positive signal for Kakao Bank, which tries to convert its flagship product from a low-yielding personal credit loan to a high-yield product, a mortgage loan.</p>
</div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/224/286/original/Screen+Shot+2021-08-17+at+3.40.11+AM.png?1629186027" class="editor-image img-responsive" data-smartkarma-image-id="224286"></figure></section></section>

3 key points of the first earnings releasePoint 1: Kakao Bank recorded ₩116B in net profit in the first half, surpassing last year's annual performance just in half a year.This is an increase of 156.2% from the first half of last year. Net profit for the second quarter was ₩69B, up 158.7% from the second quarter of last year.
Point 2: As for Kakao Bank's platform sector growth, stock account opening application services and loans linked to non-banking financial companies (NBFCs) increased by 43% and 51%, respectively, from the end of the previous year.
This platform sector performance is crucial in determining the possibility of Kakao Bank taking a healthier growth path. And it seems to have robust growth in this area.

Point 3: As of the end of June, Kakao Bank users stood at 16.71 million, an increase of 1.27 million from the end of last year.

The increase in new customers of Kakao Bank this year was led by people in their 40s and older. Since launching the service, the percentage of accumulated customers in their 20s and 30s was 54%, but 48% of new customers in the first half of this year are in their 40s and 50s.
This is a very positive signal for Kakao Bank, which tries to convert its flagship product from a low-yielding personal credit loan to a high-yield product, a mortgage loan.



Local Retail-Led Momentum Trading Today, Preemptively Reflecting Kakao Bank's Earnings Release

<h2>KOSPI 200 Fast Entry screening</h2><p>Kakao Bank and Krafton's KOSPI 200 Fast Entry are 100% certain at this point.</p><div class="content-highlight"><p><strong>They need to be within the top 50 full market cap rankings on the KOSPI for 15 trading days after listing.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/755/original/Screen+Shot+2021-08-15+at+3.07.46+AM.png?1629011369" class="editor-image img-responsive" data-smartkarma-image-id="223755"></figure></section><p>Currently, LG Display ranks 50th in the KOSPI market cap, and its market cap is in the 7.4-8 trillion range. Fast entry is possible as long as the market caps of both Kakao Bank and Krafton do not plunge below half in the next ten trading days.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"KOSPI 200 Fast Entry"}'>KOSPI 200 Fast Entry</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KakaoBank Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>KakaoBank Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Krafton Inc"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Krafton Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Display Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'><div><div>LG Display Co Ltd, currently at the 50th spot</div></div></td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44414}' data-sheets-numberformat='[null,5,"mm. dd",1]'>08. 06</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33.1619965426}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩33.16T</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.961399325}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.96T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44417}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+3">08. 09</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":37.2953686045}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩37.30T</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.854054615}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.85T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44418}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+1">08. 10</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33.9221569218}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩33.92T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":22.19972378}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C3/1000000000000">₩22.20T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.925617755}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.93T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44419}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+1">08. 11</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35.3474576328}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩35.35T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":19.90151449}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C3/1000000000000">₩19.90T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.90772697}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.91T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44420}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+1">08. 12</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35.0623974906}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩35.06T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":19.85261642}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C3/1000000000000">₩19.85T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.710928335}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.71T</td>
</tr>
<tr>
<td data-sheets-value='{"1":3,"3":44421}' data-sheets-numberformat='[null,5,"mm. dd",1]' data-sheets-formula="=R[-1]C[0]+1">08. 13</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":36.3926781542}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C2/1000000000000">₩36.39T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21.36845659}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C3/1000000000000">₩21.37T</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7.44256656}' data-sheets-numberformat='[null,2,"₩#,##0.00T",1]' data-sheets-formula="=R[0]C[3]*R3C4/1000000000000">₩7.44T</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

KOSPI 200 Fast Entry screeningKakao Bank and Krafton's KOSPI 200 Fast Entry are 100% certain at this point.They need to be within the top 50 full market cap rankings on the KOSPI for 15 trading days after listing.Currently, LG Display ranks 50th in the KOSPI market cap, and its market cap is in the 7.4-8 trillion range. Fast entry is possible as long as the market caps of both Kakao Bank and Krafton do not plunge below half in the next ten trading days.








KOSPI 200 Fast Entry
KakaoBank Corp
Krafton Inc
LG Display Co Ltd, currently at the 50th spot


08. 06
₩33.16T
-
₩7.96T


08. 09
₩37.30T
-
₩7.85T


08. 10
₩33.92T
₩22.20T
₩7.93T


08. 11
₩35.35T
₩19.90T
₩7.91T


08. 12
₩35.06T
₩19.85T
₩7.71T


08. 13
₩36.39T
₩21.37T
₩7.44T

Source: KRX



Why Would Kakao Bank/Krafton's KOSPI 200 Fast Entry Float Estimations Be Such an Extraordinary Task?

Equity Bottom-Up

<p>In the past week, several high-level senior managers of Kakao Bank have partially sold their shares. The following is a list of the Kakao Bank shares sold by the company's senior managers:</p><ul>
<li>
<strong>Lee Hyung-Joo</strong> (CBO, Chief Business Officer) - Sold 82,289 shares at average price of 58,662 won, profit of 4.8 billion won.</li>
<li>
<strong>Chung Kyu-Don</strong> (CTO, Chief Technology Officer) - Sold 10,600 shares at average price of 62,336 won, profit of 6.6 billion won.</li>
<li>
<strong>Shin Hye-Chul</strong> (CHO, Chief Human Resources Officer) - Sold 26,489 shares at an average price of 85,934 won, profit of 2.3 billion won.</li>
<li>
<strong>Yu Hyo-Bum</strong> (Head of Internal Audit) - Sold 30,935 shares at an average price of 71,439 won, profit of 2.2 billion won. </li>
</ul><p>The fact that these senior managers of Kakao Bank have been partially selling their shares in the company is a NEGATIVE on the company. If the company's prospects are so good, why are these senior managers selling the shares in Kakao Bank? </p>

In the past week, several high-level senior managers of Kakao Bank have partially sold their shares. The following is a list of the Kakao Bank shares sold by the company's senior managers:

Lee Hyung-Joo (CBO, Chief Business Officer) - Sold 82,289 shares at average price of 58,662 won, profit of 4.8 billion won.

Chung Kyu-Don (CTO, Chief Technology Officer) - Sold 10,600 shares at average price of 62,336 won, profit of 6.6 billion won.

Shin Hye-Chul (CHO, Chief Human Resources Officer) - Sold 26,489 shares at an average price of 85,934 won, profit of 2.3 billion won.

Yu Hyo-Bum (Head of Internal Audit) - Sold 30,935 shares at an average price of 71,439 won, profit of 2.2 billion won. 
The fact that these senior managers of Kakao Bank have been partially selling their shares in the company is a NEGATIVE on the company. If the company's prospects are so good, why are these senior managers selling the shares in Kakao Bank? 

<p>It is now clear that Netmarble sold part of its stake in Kakao Bank yesterday in the market to finance the acquisition of SpinX, a social casino company.</p><p>In other words, Netmarble sold its Kakao Bank stake because it needed immediate cash. <span>Earlier this month, Netmarble announced that it would purchase a 100% stake in Leonardo Interactive Holdings Limited, the parent company of SpinX.</span></p><div class="content-highlight"><p><strong>The 100% stake acquisition price is ₩2.513T.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/219/original/Screen+Shot+2021-08-11+at+1.48.24+AM.png?1628661029" class="editor-image img-responsive" data-smartkarma-image-id="223219"></figure></section><p>Netmarble said in a regulatory filing that it would pay 80% of the acquisition price at the time of contract termination and the remaining 20% ​​over the next four years.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/225/original/Screen+Shot+2021-08-11+at+1.51.07+AM.png?1628661602" class="editor-image img-responsive" data-smartkarma-image-id="223225"></figure></section><p><strong>It means that the total money Netmarble needs right now is ₩2.104T, which is 80% of the acquisition amount. Netmarble revealed that ₩1.779T of this ₩2.104T was covered by short-term borrowing. In other words, the immediate cash needed right now is ₩232B.</strong></p><p>However, Netmarble's cash assets at the end of this first quarter stood at ₩260B. Even ₩232B is a size that needs to use up all of its cash holdings, so it places a significant financial burden on Netmarble.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/228/original/Screen+Shot+2021-08-11+at+2.05.56+AM.png?1628662449" class="editor-image img-responsive" data-smartkarma-image-id="223228"></figure></section>

It is now clear that Netmarble sold part of its stake in Kakao Bank yesterday in the market to finance the acquisition of SpinX, a social casino company.In other words, Netmarble sold its Kakao Bank stake because it needed immediate cash. Earlier this month, Netmarble announced that it would purchase a 100% stake in Leonardo Interactive Holdings Limited, the parent company of SpinX.The 100% stake acquisition price is ₩2.513T.Netmarble said in a regulatory filing that it would pay 80% of the acquisition price at the time of contract termination and the remaining 20% ​​over the next four years.It means that the total money Netmarble needs right now is ₩2.104T, which is 80% of the acquisition amount. Netmarble revealed that ₩1.779T of this ₩2.104T was covered by short-term borrowing. In other words, the immediate cash needed right now is ₩232B.However, Netmarble's cash assets at the end of this first quarter stood at ₩260B. Even ₩232B is a size that needs to use up all of its cash holdings, so it places a significant financial burden on Netmarble.

Three Local Stocks Exposed to Netmarble's Stake Sale Risk: NCsoft, HYBE, & Kakao Games

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)

Netmarble Sells More Kakao Bank Shares Worth 133 Billion Won - Overhang Concerns

On 25 August, it was announced after the market close that Netmarble Corporation (251270 KS) sold additional 1.62 million shares of KakaoBank...

Douglas Kim

Local Retail-Led Momentum Trading Today, Preemptively Reflecting Kakao Bank's Earnings Release

This post summarizes the three key points of Kakao Bank's first earnings release today. It then discusses today's price movement and what we should...

Sanghyun Park

Why Would Kakao Bank/Krafton's KOSPI 200 Fast Entry Float Estimations Be Such an Extraordinary Task?

This post explains why Kakao Bank and Krafton's KOSPI 200 Fast Entry float estimations would be such an extraordinary task.

Sanghyun Park

Kakao Bank - Insiders Are Selling

Several senior managers of Kakao Bank have been partially selling their shares in the company which is a NEGATIVE on the company.

Douglas Kim

Three Local Stocks Exposed to Netmarble's Stake Sale Risk: NCsoft, HYBE, & Kakao Games

Netmarble will continue to need short-term cash. Perhaps, for this reason, the stock prices of all three stocks exposed to this risk have undergone...

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)