KB News Desk
Kakao’s plan to split into two listed companies, Kakao AI and Kakao X has prompted a streak of target price cuts from brokerage houses, citing concerns over a potential holding company discount and the profitability of its AI business.
According to reports released by 11 securities firms on Kakao on Monday, five lowered their target prices for the company: Hana Securities, Kiwoom Securities, Samsung Securities, Meritz Securities and Daol Investment & Securities.
Kiwoom Securities cut its target price by the largest margin, by 36.4 percent, from 110,000 won to 70,000 won ($80 to $51).
Meritz Securities lowered its target from 52,000 won to 37,000 won, while Daol Investment & Securities brought down its target from 60,000 won to 45,000 won. Samsung Securities and Hana Securities lowered their targets from 49,000 won to 40,000 won and from 58,000 won to 50,000 won, respectively.
Samsung Securities and Meritz Securities also downgraded their investment ratings on Kakao from “buy” to “hold.”
While Kakao expects the restructuring to improve the efficiency of business decision-making and capital allocation while reducing the “conglomerate discount” currently applied to the company, analysts say Kakao X could face a separate discount as its structure becomes closer to that of a holding company.
“Kakao X could be valued more like a holding company after the split, as the value of its equity stakes in subsidiaries would account for most of its corporate value rather than its operating businesses,” Oh Dong-hwan, an analyst at Samsung Securities, said.
“The negative impact of a higher holding company discount could outweigh the benefits of having a clearer net asset value of its subsidiaries.”
Kiwoom Securities stressed Kakao AI’s growth strategy may not translate into tangible results in practice. Though Kakao is emphasizing the growth potential of AI centered on Kanana, the brokerage notes that the company has yet to fully establish autonomous agents powered by frontier models.
On Friday, Kakao announced plans to split the company into two entities in a 63.5-to-36.5 ratio. The newly established Kakao AI will oversee KakaoTalk, AI, advertising and commerce businesses. The surviving entity, Kakao X, will hold stakes in affiliates including KakaoBank, Kakao Pay and Kakao Mobility.
The split is scheduled to take effect on Jan. 1 next year, with the two entities listed — and relisted — on Jan. 27.
The market expects Kakao X to trade at a separate holding company discount of 30 percent to 50 percent as it loses its core business, KakaoTalk, a popular messaging app here.
“With KakaoTalk, its key operating asset, excluded from Kakao X, the market could increasingly value the company based on its net asset value, using an investment or holding company approach rather than the price-to-earnings ratio,” said Kim So-hye, an analyst at Hanwha Investment & Securities.
Kakao’s share price stood flat at 35,650 won as of 1:40 p.m., shedding 0.42 percent from the previous session. The shares plunged 7.49 percent on Friday, the day of the announcement, erasing more than 1 trillion won in market capitalization in a single session.
