By Lee Min-hyung
Kakao’s stock price is setting record highs on expectations of its Japanese subsidiary’s initial public offering (IPO) plan.
The nation’s leading mobile messenger operator closed at this year’s record of 129,500 won ($114.86) on the Seoul bourse Friday, up 1.97 percent, or 2,500 won, from a day earlier. The stock value has continued to improve in recent days after overseas media reported on Kakao Japan’s plan to go public on the Tokyo Stock Exchange in 2020.
Kakao did not confirm the reports, but said the IPO is one option to boost the Japanese branch’s growth.
Kakao started the nation’s dominant mobile messenger app, Kakao Talk, in March 2010 when smartphones began sweeping the nation. Driven by explosive success, the company has aggressively started other mobile app services — such as Kakao Taxi and Kakao Driver. As of Friday, Kakao’s market capitalization topped 8.77 trillion won on the benchmark KOSPI.
Despite initial success here, weakening profitability has hit the company in recent years due to Kakao’s heavy reliance on a few revenue sources, including advertising sales.
But the company is now on track to recover profitability by stabilizing business structures for its major affiliates — Kakao Pay, Kakao Mobility and Kakao Bank.
“Kakao comes with enough earnings growth potential, as its advertisement sales posted a major turnaround and its new businesses began to generate outstanding outcomes,” Meritz Securities analyst Kim Dong-hee said. “The annual growth rate for Kakao’s earnings per share (EPS) has reached 42.4 percent for the past three years, far exceeding its global counterparts’ average of 28.2 percent.”
The Kakao affiliates have so far failed to chalk up revenue sufficient to offset their investment costs — in particular, Kakao Taxi, the nation’s largest taxi-hailing app with 14.9 million users. Kakao started it in 2015, but the company has focused on raising its subscriber base without charging commissions for users and registered taxi drivers, which has done little to drive up the firm’s earnings.
As it gained popularity, the company spun off its transportation-related service unit, Kakao Mobility, into a separate entity last month as part of its first step to streamline decision-making and design more concrete business models.
In July, Kakao created a nationwide sensation by initiating the nation’s second internet-only bank, Kakao Bank. The mobile banking service has so far drawn more than 3 million subscribers, outpacing home-turf rival K bank by a huge margin even though the latter began in April.