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

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Kakao Pay IPO: Offering Detail & Valuation Issues

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Kakao Bank IPO: Offering Detail, Valuation Issue, & Index Fast Entry

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Clepsydra Capital

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

Equity Capital Markets

In calculating the corporate value for this listing, Kakao Bank selected PBR, the traditional method of calculating the value of financial companies.Apparently, the local street has no big disagreement about the use of PBR itself.Then, what matters is the level of the PBR multiple premium.Based on the indicative price band, Kakao Bank's PBR is 3.2-3.5x. On the other hand, the PBRs of Korea's four major financial holding companies are currently hovering between 0.4 and 0.5x.That is, based on the current corporate value to net assets, Kakao Bank wants to receive a 7 to 8 times higher premium than Korea's major commercial banks.<table class="table table-striped">
<colgroup>
<col width="200">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Indicative price band"}'>Indicative price band</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"High"}'>High</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price"}'>Price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩33,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":39000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩39,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Implied market cap"}'>Implied market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15766.510221}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*R14C2/1000000000">₩15,766.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18633.148443}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-3]C[0]*R14C2/1000000000">₩18,633.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity, including capital inflow from IPO"}'>Equity, including capital inflow from IPO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5009.4}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-13]C[0]+R[-12]C[0]">₩5,009.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5402.05}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-13]C[-1]+(Terms!R[-15]C[-1]*R[-5]C[0])/1000000000">₩5,402.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"PBR"}'>PBR</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3.1473849604743087}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-3]C[0]/R[-1]C[0]">3.15x</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3.449273598541294}' data-sheets-numberformat='{"1":2,"2":"0.00x"}' data-sheets-formula="=R[-3]C[0]/R[-1]C[0]">3.45x</td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>The valuation that converts the future value into present value at a time when growth is expected to stagnate still holds a significant premium.Kakao Bank's total deposits estimated as of 2025, when high growth will likely come to an end, are around ₩100T. Applying KB Financial's current multiple of 0.06 times the total deposits puts Kakao Bank's value in 2025 at ₩6T. Converted to the present value, the present value becomes ₩4.3T, suggesting a 3.7 to 4.3x premium to KB Financial.

In calculating the corporate value for this listing, Kakao Bank selected PBR, the traditional method of calculating the value of financial companies.Apparently, the local street has no big disagreement about the use of PBR itself.Then, what matters is the level of the PBR multiple premium.Based on the indicative price band, Kakao Bank's PBR is 3.2-3.5x. On the other hand, the PBRs of Korea's four major financial holding companies are currently hovering between 0.4 and 0.5x.That is, based on the current corporate value to net assets, Kakao Bank wants to receive a 7 to 8 times higher premium than Korea's major commercial banks.







Indicative price band
Low
High


Price
₩33,000
₩39,000


Implied market cap
₩15,766.5B
₩18,633.1B


Equity, including capital inflow from IPO
₩5,009.4B
₩5,402.1B


PBR
3.15x
3.45x

Source: DART

The valuation that converts the future value into present value at a time when growth is expected to stagnate still holds a significant premium.Kakao Bank's total deposits estimated as of 2025, when high growth will likely come to an end, are around ₩100T. Applying KB Financial's current multiple of 0.06 times the total deposits puts Kakao Bank's value in 2025 at ₩6T. Converted to the present value, the present value becomes ₩4.3T, suggesting a 3.7 to 4.3x premium to KB Financial.

Kakao Bank IPO: Valuation Peer Group Issues & Local Street's General View on Valuation Level

KakaoBank

Kakao Bank IPO: Valuation Peer Group Issues & Local Street's General View on Valuation Level