Kakao
As Kakao (035720.KS) moves to split its KakaoTalk and artificial intelligence operations from its affiliate investment arm into two separate companies, brokerages are lowering their expectations rather than raising them. Analysts say it is unclear whether the split will leave the investment company, “KakaoX,” facing a wider holding-company discount while “Kakao AI” earns a growth-stock premium high enough to offset it.
Samsung Securities (016360.KS) on the 24th cut its investment rating on Kakao to Hold from Buy, according to FnGuide. It also lowered its price target by 18.4%, to 40,000 won from 49,000 won. Samsung Securities valued KakaoX at 10.8 trillion won and Kakao AI at 7 trillion won after the split, putting their combined fair value at 17.8 trillion won.
Kakao plans to divide the existing company into Kakao AI, a newly created entity handling AI, advertising and commerce operations centered on KakaoTalk, and KakaoX, the surviving entity holding stakes in other affiliates and investment assets. The split ratio is 36.49% for Kakao AI and 63.51% for KakaoX. In effect, Kakao AI is positioned as an internet-platform and AI growth company, while KakaoX takes on a clearly separate role as an investment-type holding company holding stakes in affiliates.
The spin-off itself was rated positively for shareholder value. Because existing shareholders directly hold stakes in both companies, the structure avoids the dilution of economic ownership in core businesses that can occur during an initial public offering (IPO) following a physical split. Analysts also cited as an advantage that the arrangement moves away from the previous structure, in which AI operations and affiliate investment and restructuring were managed together in a single company, allowing more efficient business-by-business management and capital allocation.
Still, Samsung Securities focused on the possibility that a higher holding-company discount than before could apply as KakaoX’s character as an investment-type holding company becomes clearer. It noted in particular that if unlisted subsidiaries such as Kakao Mobility are additionally listed, the discount tied to overlapping listings could grow further.
Whether Kakao AI can secure a high growth-stock premium also remains uncertain, according to the assessment. Samsung Securities said one of the key reasons for Kakao’s current undervaluation lies not only in its governance structure but also in the market’s low confidence in the competitiveness and monetization of its AI services. The firm said that while Kakao is expanding related services, it has not sufficiently demonstrated distinctive user value compared with global AI services.
“The combined corporate value after the split is expected to be a battle between the extent of the re-rating for Kakao AI and the de-rating for KakaoX,” said Oh Dong-hwan, an analyst at Samsung Securities. “At this point, a more conservative approach is needed toward the uncertainty over the discount rate that will apply after the split, rather than expectations of a value increase from the split.”
Meanwhile, other brokerages also cut their price targets on Kakao on the same day, reflecting uncertainty over the business value and growth prospects following the spin-off. Kiwoom Securities (039490.KS) lowered its target by 36.4%, to 70,000 won from 110,000 won, while Hana Securities also cut its target by 13.8%, to 50,000 won from 58,000 won.
