Naver Corp., whose Line messaging service propelled shares to levels twice as expensive as Google Inc., is getting sold by overseas investors faster than any other South Korean stock amid concern the rally went too far.
Foreigners sold a net $638 million of the shares during the past month, the most among KOSPI index members, according to data compiled by Bloomberg. Naver, which also operates the nation’s most popular search engine, sank 13 percent from a record high on March 10, after a 99 percent surge during the previous year that left it trading at 43 times estimated 12-month profit.
While Line’s expansion to 400 million users spurred analysts to give Naver the highest rating among the world’s major Internet companies, Shinhan BNP Asset Management says the stock is vulnerable to further losses as investors reassess valuations in the industry.
Even after its drop, Naver trades at a more than 100 percent premium versus Google and is almost four times more expensive than South Korea’s benchmark KOSPI index.
“The stock price needs to be put in check after rallying so much, and this goes for other Asian Internet companies as well,” Im Jeong Jae, a Seoul-based money manager at Shinhan BNP Paribas, which oversees about $33 billion, said by phone on March 27. “The question comes down to whether the price of this expensive stock could be justified. It’s not easy for investors to have conviction on this.”
Technology companies had led gains in Asian equities during the past 12 months amid speculation that growing demand for social networking, e-commerce and online games would boost earnings and fuel takeovers in the industry.
Naver, South Korea’s seventh-biggest company by market capitalization, tumbled 6.5 percent yesterday to the lowest level since Feb. 25, amid a selloff in regional peers including Tencent Holdings Ltd., operator of the WeChat messaging service, that sent the Bloomberg Asia Pacific Internet Index to its biggest one-day drop in two months. The Nasdaq Composite Index of U.S. technology stocks dropped 2.6 percent on April 4 to the lowest level in two months. (Bloomberg)
About $3.3 billion has been erased from Naver since March 10, leaving it valued at $23 billion, or just below the level of San Francisco-based microblogging service Twitter Inc.
“We sold the stock as investors were getting too excited,” Lee Jin Woo, a money manager at KTB Asset Management Co., which oversees about $7 billion, said by phone on April 3. “This is a time for investors to check up on the company.”
Naver’s long-term rally isn’t over, according to Heo Pil-seok, the chief executive officer at Midas International Asset Management in Seoul who bought the shares in the past six months. The company is expanding in Japan, Southeast Asia and Latin America, and the potential initial public offering of Line may give the stock a further boost, Heo said.
Naver’s Line unit has several possibilities for holding an IPO, though nothing has been decided, Chief Operating Officer Takeshi Idezawa said Feb. 26. The messaging service may be valued at as much as $14.9 billion, according to BNP Paribas SA. Facebook Inc., the world’s largest social network, agreed to buy mobile-messaging startup WhatsApp Inc. for as much as $19 billion in cash and stock in February.
Line is the most popular messaging service in Japan, Taiwan and Thailand, topping a similar offering from Facebook, Samsung Securities Co. said in a Feb. 20 report, citing data from researcher App Annie Ltd.
Naver said it reached 400 million global users for Line as of April 1. WhatsApp has about 450 million active users, Samsung Securities wrote in its February report. Revenue from the Line unit accounted for 21 percent of Naver’s sales in the final quarter of last year, up from about 8 percent a year earlier, according to a statement posted on its website Feb. 6. (Bloomberg)
