[Kosdaq Star] Crypto fear prompts Raonsecure recovery

This is the 47th in a series of articles analyzing major companies traded on the tech-heavy Kosdaq market. -- Ed.

Raonsecure, a local mobile security solutions provider, had a year filled with a string of opportunities, as the government pushed to abolish the use of ActiveX from major websites and approved operations of mobile banks. But nothing seems to have pushed the price ceiling of the Kosdaq-listed company further than growing interest in one particular market -- cryptocurrency.

On the back of business deals in December with cryptocurrency exchanges, shares of Raonsecure surged 15 percent in the past 20 trading days. It closed at 3,180 won ($2.95) on Friday. When local cryptocurrency exchange Youbit on Tuesday was hacked at around 4:35 a.m. and had digital assets stolen, Raonsecure hit a 52-week high at 4,130 won in the morning trade, but fell to 3,495 won in closing. The price barely topped 3,000 won from July to November.

Plunges in major digital coins and the bankruptcy of Yapian, operator of Youbit, have left cryptocurrency investors gripped in fear, according to market analysts. “(Raonsecure) was bundled into a group of cryptocurrency-themed stocks,” said Han Seul-ki, an analyst at NH Investment & Securities.

The events, in reverse, shed light on Raonsecure, which in December included two undisclosed cryptocurrency exchanges in its customer lineup for biometric mobile security systems, previously composed of local banks.

The firm has also been in talks with multiple exchanges, in the wake of a state regulation Wednesday under which local exchanges -- Bithumb, Coinone, Korbit and Upbit -- are mandated to get certification for Information Security Management Systems, or ISO 27001, starting next year.

Raonsecure is the first Korean firm certified by the Fast Identity Online (FIDO) Alliance and the only Korean provider of an all-in-one mobile security solution package -- mobile vaccine, mobile virtual keyboard, mobile authenticator and mobile device management.

Raonsecure‘s biometrics-based security package does not require ActiveX plug-ins, the outdated security software developed by Microsoft in 1996 that the Moon Jae-in government has pledged to get rid of.

Also, the FIDO Alliance has said its upcoming biometric authentication system, or FIDO 2.0, would be applicable on not only mobile devices but also PCs and devices run on internet of things, a boon to its customer banks.

Despite market prospects, Raonsecure took a quarterly loss in the third quarter of 2017, the first in seven quarters. Its net loss and operating loss came to 437 million won and 461.4 million, respectively.

Mixed views remain over the company losing money despite market opportunities and favorable business environment.

Han of NH Investment & Securities said the firm’s subpar performance undermined investor attention.

Meanwhile, Kim Nam-guk, an analyst at Yuanta Securities Korea said that the quarterly loss may have stemmed from the cost for building biometrics-powered payment gateway infrastructure in Malaysia following an August deal with Malaysian fintech firm Infinitium.

Kim, however, noted the firm is overvalued, citing a projection of its 12-month forward price-earnings ratio at 17.6 percent, based on the estimate of 2017 price-earnings ratio at 37.7. If the forward ratio is over 10, the stock is considered overpriced. 

Raonsecure, founded in 1998, was listed on the tech-heavy Kosdaq in 2000. The firm has a market cap of 101.2 billion won and was the 556th-largest firm on Kosdaq as of Friday. Chief Executive Lee Soon-hyung holds 21.17 percent of the Seoul-based firm.

By Son Ji-hyoung 
(consnow@heraldcorp.com)