The stock prices of Kakao Group, including Kakao Pay, surged on expectations of policies from the Lee Jae-myung government, while global investment bank (IB) JP Morgan evaluated on the 10th that this is difficult to justify.
Kakao Pay reached its daily upper limit price (the highest limit of daily price fluctuation) on the KOSPI market the previous day. On that day, it also showed a double-digit stock price increase in the pre-market (Pre-Market, 8 a.m. to 8:50 a.m.). Kakao, KakaoBank, and Kakao Games are all strong.
The background for the surge in Kakao Pay's stock price was due to many investors expecting benefits from the new government's local currency and consumption coupon policies. JP Morgan claimed that the stock price increase is excessive in this regard.
According to JP Morgan, Kakao Pay holds a 30% share of the government’s local currency and consumption coupon budget of 10 trillion won and if a payment fee rate of 0.56% is set, the revenue would be approximately 17 billion won. This is about 2% of this year's estimated annual revenue. The operating profit is also estimated to be around 3 billion won. JP Morgan noted, "This is not a meaningful performance contribution for a company with a market capitalization of 6.7 trillion won."
Another factor pushing up the stock prices of Kakao Pay and KakaoBank was the prospect of being the issuer of a "won-based stablecoin". The won-based stablecoin is a virtual asset designed to maintain its value equivalent to that of the Korean won, which the new government is pushing to introduce.
However, JP Morgan stated, "It is premature to conclude that the won-based stablecoin policy will be a beneficiary, and there is still a great deal of uncertainty," adding that "the rise in Kakao's stock price excessively reflects the surge of Kakao Pay and KakaoBank when applying a 60% holding company discount rate under the net asset value method."
JP Morgan claimed that the rise in Kakao Group's stock is similar to the rally that occurred from the end of 2022 to the beginning of 2023. It adds that the increase is based on expectations rather than fundamentals.
JP Morgan noted, "The rise in Kakao Group's stock resembles past cases that eventually normalized," and recommended maintaining a conservative stance. JP Morgan proposed investment opinions of ▲ reducing Kakao Pay's weighting ▲ maintaining neutrality on KakaoBank ▲ neutrality on Kakao.