A user makes a transaction with Kakao Bank’s mobile app. Yonhap
Yuanta Securities Korea raised questions about the valuation of Kakao Bank.”Kakao Bank is a bank, so it should do its business in compliance with banking regulations,” Yuanta analyst Jeong Tae-joon said in his report last Thursday. “Considering the nature of the banking industry, Kakao Bank’s return on equity cannot surpass 10 percent, so its target price range seems to be inappropriate.”The internet-only bank, which seeks to go public on Aug. 5, has sought to price its stock at somewhere between 33,000 won and 39,000 won, so that its market capitalization can surpass at least 15.7 trillion won, which is far higher than those of the Hana and Woori financial groups.The Yuanta analyst pointed out that the bank selecting America’s Rocket Companies, Brazil’s PagSeguro, Sweden’s Nordnet and Russia’s TCS as its comparable firms was inappropriate, saying that the choice resulted in such an excessively high target price range.”Its comparable firms are KB, Shinhan, Hana and Woori financial groups, because Kakao Bank is a domestic bank,” he said.Kakao itself has also received an unfavorable review from Morgan Stanley, which suggested an underweight rating for Kakao’s share last Wednesday, citing that it has been overestimated, compared to the share of its rival, Naver, considering their anticipated price-earnings ratios for next year.The U.S. investment bank mentioned in particular that Kakao’s stock price has already reflected expectations about the forthcoming listings of Kakao Bank and KakaoPay. It predicted that investors will shift their focus to the two financial subsidiaries, causing a drop in their parent company’s stock price.