South Korea’s fintech stretches valuation limits

2 minute read

Digital lender Kakao Bank Corp made a stunning debut in Seoul earlier this month, becoming South Korea's biggest financial services firm by market value.The Kakao Bank app is seen on a mobile phone screen displayed in front of the lender's logo in this illustration picture taken August 6, 2021.

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HONG KONG, Sept 2 (Reuters Breakingviews) - South Korea’s financial technology mania has reached new heights. The payments-to-wealth management arm of super-app owner Kakao cut the price range of its initial public offering by roughly 6% after regulators ordered it read more to revise its filings. Kakao Pay’s enterprise will now be worth as much as about $10 billion, or 27 times 2021 annualised sales. Brazilian fintech services PagSeguro (PAGS.N) and StoneCo (STNE.O) and American e-lender Upstart (UPST.O) trade at an average 16 times.

The company’s edge is its $60 billion parent. As of June, Kakao’s messaging platform boasted 46 million local users – nearly 90% of South Korea’s population. That has turbocharged payments growth: transactions have been expanding at an annual rate of 89% since 2018 and hit 12.5 trillion won ($10.8 billion) last year, according to analysts at Daiwa.

Dizzying valuations have become a norm in South Korea’s hot fintech sector. Affiliate Kakao Bank (323410.KS), whose shares jumped 80% on their debut last month, now fetches 15 times book value, well above traditional lenders. But justifying those sums requires creative evaluations. (By Robyn Mak)

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Editing by Una Galani and Sharon Lam

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