KineMaster investors betting on Hyperconnect deal

A KineMaster user edits video using the app. / Courtesy of KineMaster

By Park Jae-hyuk

Expectations of a takeover of KineMaster by a foreign tech giant are growing further, after Hyperconnect, the unlisted Korean startup that operates the Azar video chat app, was sold last week for $1.7 billion to the Nasdaq-listed Match Group, which is well known for its dating-app Tinder.

Both KineMaster and Hyperconnect have long been regarded as the next Korean mobile app developers likely to hit the jackpot overseas, as Naver's Japanese subsidiary LINE did in the Asian market with its mobile messenger app.

The successful Hyperconnect deal has therefore led more domestic investors to expect one of the providers of global social media platforms, such as TikTok, Facebook and YouTube, to buy the Kosdaq-listed mobile video editor app operator, whose major shareholders have sought to sell their controlling stakes since late last year.

At this moment, the procedure for the planned sale appears to be going smoothly.

Sources said Nomura Financial Investment, which was hired as the underwriter for the deal last year, started to send investment teasers recently to potential buyers here and overseas. The list of the potential buyers will likely be disclosed at the time of the preliminary bidding, which is expected to take place later this month at the earliest.

A regulatory filing by KineMaster also indicated global firms are interested in the deal.

“Investment teasers will be sent to global companies that have expressed their interest in the sale and companies that are likely to be interested,” the company said in its filing last month.

In addition to Nomura, the nation's top-tier law firm Kim & Chang and the leading accounting firm Samil PwC are involved in the planned sale as the seller's advisers.

Market participants view the seller's decision to hire them as an indication of its intention to talk with global players. A KineMaster official did not rule out the possibility of a foreign firm's acquisition, saying there are not many Korean companies providing similar services.

The company's earnings growth last year is another favorable factor for the seller.

KineMaster announced last Monday its sales in 2020 rose 53.45 percent year-on-year to 29.8 billion won ($27 million). Its operating profit jumped to 4.15 billion won from 318 million won during the same period.

“The revenue generated from the KineMaster app increased 81.73 percent to 25.6 billion won in 2020 from 14.1 billion won in 2019,” the company said.

Data compiled by mobile data and analytics platform App Annie showed earlier this month that KineMaster ranked fifth among Korean mobile publishers in terms of global downloads in 2020, following Naver, Samsung Group, Mobirix and Netmarble. Hyperconnect ranked 10th on the chart.

Based on the favorable news, KineMaster's share price closed at 32,300 won on the first trading session after the Lunar New Year holiday, up 7.31 percent from the previous session's closing price.

Its market cap surpassed 430 billion won. Considering TikTok had previously been valued at 50 times its sales projection last year, however, the valuation of KineMaster could possibly jump above 1 trillion won, according to industry officials.