Brazilian fintech used for KakaoBank, Kakao Pay's value evaluation

KakaoBank and Kakao Pay, which are set to go public only seven days apart, each compared themselves to a Brazilian financial technology firm for their valuations, their initial public offering applications showed Tuesday.

The companies last week submitted their applications to Korea Exchange, the country’s stock market operator. KakaoBank said it plans to go public on Aug. 5 while Kakao Pay set its IPO date for Aug. 12.

In their IPO applications, KakaoBank compared itself to four overseas companies -- Rocket Companies, PagSeguro Digital, TSC Group Holdings and Nordnet AB. Kakao Pay referred to PayPal, Square and also PagSeguro.

PagSeguro is a fintech platform of Brazil’s internet portal Universo Online. The company, listed on the New York Stock Exchange, mainly provides financial technology solutions and services for consumers, individual entrepreneurs, micromerchants and small and medium-sized enterprises in Brazil. It expanded to a digital banking and financial platform after acquiring a banking license in 2019.

Their choice of comparison highlighted the difficulty of establishing valuation due to the novelty of their business models. KakaoBank is the country’s second internet-only bank, having launched in 2017. Kakao Pay started with money transfer services but is expanding to various financial services such as stock investment and insurance.

KakaoBank, which is expected to exceed a valuation of 20 trillion won based on its IPO price range, explained that the company chose four companies whose operating profit from business-to-consumer financial platforms and online-based loan services each accounted for more than 20 percent of total operating profit last year. The company said it is not appropriate to compare it with local banks as they are listed as financial holdings companies that also have insurance, brokerages and credit card services in their portfolios.

“Comparing (corporate value) with local banks offered a limited insight, as valuation criteria used for traditional lenders fails to evaluate KakaoBank‘s business of mobile-based non-face-to-face operations and profitability and high growth of operating profit generation through it as well as its capacity as a financial platform based on monthly active users,“ the lender noted.

Kakao Pay, expected to be valued up to 12.5 trillion won at the upper limit of the IPO price, said it chose three companies to find similar business models where they earn more than 30 percent via payment-related services and operate business-to-consumer financial platforms. 

By Park Ga-young (gypark@heraldcorp.com)