Naver and Kakao, Historic Stock Price Expectations Rising This Year

Naver Expands Financial Services to Japan and Southeast Asia Based on Line's Dominance
Kakao Sees Surge in Simple Payment Transactions Following KakaoTalk Chat Ads Success

[Asia Economy Reporter Minwoo Lee] There is growing confidence in the forecast that Naver and Kakao, the leading internet portal companies in South Korea, will reach record-high stock prices this year. These companies have embarked on full-scale business expansion in the financial sector, including simple payment services and internet banking, and their main revenue source, advertising, is also expected to show steady growth.

According to the Korea Exchange on the 8th, the stock prices of Naver and Kakao, the two major domestic internet portals, have been rising continuously. Naver's stock price closed at 187,000 KRW the previous day, up 3.6% from the previous trading day. It has risen about 25% in three months, approaching a 52-week

record high of 190,000 KRW. Kakao recorded a new high of 160,000 KRW the previous day, which is a 71% increase compared to the 52-week low of 93,300 KRW in February last year. Analysts interpret this as reflecting expectations due to the two major portals actively entering the financial sector.

◆ Naver Expands Financial Territory to Japan and Southeast Asia = Naver established 'Naver Financial' in November last year by spinning off the in-house independent company 'Naver Pay.' It plans to expand beyond simple payment services limited to payment and remittance to include stocks, insurance, savings, and deposits along with the 'Naver Account.' The merger of its Japanese subsidiary Line with Yahoo Japan is also a positive factor. Based on the dominance of 'Line,' which has become the national messenger in Japan, the strategy is interpreted as a full-scale attack through 'Line Pay' and 'Line Bank.' Since the total number of Line users in Indonesia, Thailand, and Taiwan reaches 160 million, it is expected to launch new financial businesses in the Southeast Asian region in the future. Naver Financial plans to introduce the function to pay with Naver Pay at offline stores in Taiwan and Thailand following Japan from the first quarter of this year.

The financial investment industry expects Naver's performance to expand significantly starting this year. Korea Investment & Securities forecasts that Naver will surpass an operating profit of 1 trillion KRW for the first time in two years this year. Sales are also expected to reach 7.585 trillion KRW this year and 9.073 trillion KRW next year. Researcher Hoyoon Jung of Korea Investment & Securities said, "This year marks the turning point for Naver's operating profit from a decline to growth after two years, and important services such as fintech (technology + finance) and webtoons are growing simultaneously in Korea and Japan. In particular, the merger with Yahoo Japan has largely eliminated concerns about intensified competition in Line's fintech market in Japan, which is also positive."

◆ Strong KakaoTalk Advertising... Stable Pay and Bank = Kakao is also expected to experience stable growth. Advertising revenue leveraging KakaoTalk traffic is expected to gain momentum, leading to a sharp increase in profits. Kakao commercialized 'Talk Biz Board,' which displays ads in the KakaoTalk chat list window, starting in October last year. It showed clear results, generating daily sales of 400 million KRW last month. Existing Kakao advertising products such as AlimTalk, Plus Friend, and #Tab Ads are also steadily growing. KakaoTalk's advertising revenue is expected to increase by 57.3% year-on-year to 201.2 billion KRW last year.

With the advertising sector, a stable source of revenue, growing further, the financial business is also expected to gain more momentum based on this. Kakao Pay, spun off in April 2017, has already established itself as a 'giant' in the domestic simple payment industry. Kakao Pay's transaction volume last year is estimated to have exceeded 50 trillion KRW, more than double the 20 trillion KRW of the previous year. Internet-only bank Kakao Bank has also turned profitable since the first quarter of last year and is expanding its presence. As of the end of November last year, it recorded deposits of 20.3936 trillion KRW and loans of 14.4376 trillion KRW. The number of customers reached 11.06 million.

NH Investment & Securities analyzed that Kakao will achieve sales of 3.59 trillion KRW and operating profit of 329.3 billion KRW this year. Sales are expected to increase by 17% and operating profit by 66.7% compared to the previous year. Researcher Jaemin Ahn of NH Investment & Securities said, "Advertising revenue leveraging KakaoTalk traffic will be fully realized this year, leading to rapid profit growth. Using KakaoTalk's overwhelming monthly active users (MAU), Kakao will aggressively expand the businesses of its subsidiaries such as Mobility, Kakao Pay, Kakao Bank, Kakao Page (webtoons and web novels), and Kakao M (music)."

This content was produced with the assistance of AI translation services.