Vigorous Naver

 

Naver’s share price exceeded 800,000 won thanks to the growth potential of its mobile messenger service Line. “The current stock price is not over-evaluated by any means, allowing for its recent growth and the high global interest in the software and IT industries as of late,” said a stock market insider, adding, “Naver will be able to become the fourth-largest company in Korea in terms of market cap sooner or later.”

Naver gained 3.16% on February 28 to close at 817,000 won (US$762.95), breaking the 800,000 won mark for the first time in its history. The price, which had remained below 700,000 won until February 24, increased no less than 19.44% during the following four sessions based on the rumor about Softbank’s purchase of Line shares. Market capitalization jumped to 26.9305 trillion won (US$25.1531 billion) during the same period to narrow its gap with SK Hynix to approximately 500 billion won. 

Under the circumstances, its share price surpassed one out of the 23 securities firms’ target prices suggested earlier this year. Five out of them had suggested a target price of between 840,000 and 850,000 won, and five out of the rest had come up with an estimate of one million won. All of these are expected to be topped in the near future. 

According to financial information provider FnGuide, the average PER of local stock firms is 43.9 for Naver at present, which is relatively higher than those of the other market cap leaders. This is why some watchers are mentioning the possibility of over-evaluation. However, the majority of experts’ consensus is that Naver’s gaining streak in the local bourse will continue for a while. 

First of all, Line is growing at a rapid pace. Experts are predicting that the service will record 1.1 trillion won in annual sales this year to more than double the figure from two years earlier. The number of its subscribers is increasing by 600,000 or so on a daily basis, and is likely to exceed 500 million before the end of this year, too.

“Line’s advertising sales in Japan are expected to surge from this year so that Naver’s annual EPS remains over 40% for the time being,” said Daishin Securities Research Analyst Kim Yoon-jin, continuing, “In view of the pace of the growth, the current price is burdensome by no means.”

KDB Daewoo Securities researcher Kim Chang-kwon echoed by saying, “Naver’s PER should not be compared to those of the other Korean companies, but we need to focus on the fact that global enterprises such as eBay and Amazon have a PER of close to 100.”

In the meantime, the number of listed shares of Naver is rather small allowing for its increasing presence. Specifically, it has 32.963 million shares listed as of now, whereas the number amounts to 147.299 million for Samsung Electronics, 220.276 million for Hyundai Motor Company, 97.344 million for Hyundai Mobis, 710.201 million for SK Hynix, and 87.187 million for POSCO. Meanwhile, the ratio of foreign shareholders reaches 59.04%, which means Naver could become one of those that are rarely accessible by individual investors, like Samsung Electronics is. 

“It is rather unlikely that the number of shares and the ratio of foreign investors will block local individual investors from buying the shares unless a sudden event occurs, such as an aggressive purchase by the majority shareholders,” IM Investment & Securities researcher Lee Jong-won commented. He added, “It is a stretch to say that the number of listed shares will pose a severe problem.”

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