[Click eStock] "Comprehensive Content Gift Set 'Kakao Enter' Launched... Possibility of Additional Mergers"

Expected Listing Market Cap 7 Trillion KRW... Inevitable Business Merger with Japanese Webtoon Platform Piccoma

[Asia Economy Reporter Minwoo Lee] Kakao Page, a content platform company specializing in webtoons and web novels, has decided to merge with Kakao M, an entertainment specialist company. This move is interpreted as a strategy to elevate corporate value ahead of an initial public offering (IPO) by transforming into a comprehensive content company. There is also speculation that additional mergers, such as with the Japanese webtoon platform Piccoma, may be pursued to achieve a sales scale that matches the expected market capitalization anticipated by the capital market.

On the 26th, Hyundai Motor Securities analyzed the merger between Kakao Page and Kakao M in this way. The day before, Kakao Page resolved to absorb Kakao M at a merger ratio of 1 to 1.3102584. The new shares issued for the merger amount to 11,741,576 shares. After the merger is completed, the total number of issued shares is expected to be 31.2 million shares (capital of 15.6 billion KRW). The valuation ratio between Kakao Page and Kakao M (based on total stock value) is expected to be calculated at 100 to 60.3. Hyundai Motor Securities estimated that after the merger, considering the existing shareholder composition of Kakao Page (Kakao 63.4%, Anchor PE 20.6%, Tencent affiliates 10.5%, etc.) and Kakao M (Kakao 77.3%, Anchor PE 12.9%), the new shareholder structure will be Kakao 68.6%, Anchor PE 17.7%, and Tencent affiliates 6.5%.

Hyundai Motor Securities forecasted that the merged company, Kakao Entertainment, will achieve sales of 862 billion KRW this year (Kakao Page 482 billion KRW, Kakao M 380 billion KRW) and operating profit of 88 billion KRW (Kakao Page 63 billion KRW, Kakao M 25 billion KRW). This represents an increase of 19% and 24%, respectively, compared to the previous year. The sales composition is estimated to be 56% from webtoons and web novels, 22% from music distribution, 18% from entertainment planning, and 4% from drama production and other areas. Hyundai Motor Securities researcher Hyunyong Kim explained, "Except for music distribution, other upstream industries are expected to experience high growth and the company’s market share is rapidly increasing, so a high multiple can be expected upon future listing."

However, additional business combinations are deemed inevitable. Researcher Kim stated, "The expected market capitalization at the time of Kakao Entertainment’s listing is set at over 7 trillion KRW, which corresponds to about 80 times this year’s expected operating profit and about 60 times next year’s expected operating profit (assuming 30% growth). Given that the growth indicators justifying such a high multiple show a maximum sales growth rate of 20% and an operating profit growth rate of up to 30%, additional mergers with highly profitable (Melon) or high-growth (Piccoma) businesses will be unavoidable to meet market expectations."

Against this backdrop, Hyundai Motor Securities maintained a 'Buy' investment opinion on Kakao with a target price of 530,000 KRW. The closing price the previous day was 473,500 KRW.

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