Webcash: Growing Adoption of Kyungrinara Led by Tax Accountants

The author is an analyst of Shinhan Investment Corp. He can be reached at hsh0628@shinhan.com. -- Ed.

2Q22 review: No market downturns in digital solutions

Webcash reported operating profit of KRW5.5bn (+29.0% YoY) on sales of KRW23bn (+21.2% YoY) for 2Q22. Earnings were in line with expectations with: 1) fees secured from two clients for In-house Bank version upgrades (from version 3.0 to 4.0); and 2) KT-Kyungrinara switching from free to paid services following the end of the promotion period.

Growing adoption of Kyungrinara led by tax accountants

From 2H21, Webcash increased its marketing efforts for Kyungrinara, launching free KT-Kyungrinara services and expanding promotions for the We Members Club (WMC) platform. With the switch of KT-Kyungrinara from free to paid services carried out in stages from 2Q22, we expect the services to contribute to steady growth in Kyungrinara earnings in 2H22.

From 2023, further growth should hinge on expansion of WMC, the digital platform for tax accountants that provides real-time connection between tax accounting programs and Kyungrinara services. Webcash has been actively promoting the WMC platform, with Kyungrinara referrals by tax accountants using the platform rewarded with membership points that can be used to pay office rent at WMC business centers.

Under the rewards program, a tax accountant with 70 referred Kyungrinara accounts would receive 7% of annual fees collected from those accounts. In addition, real-time connection with Kyungrinara user accounts through the WMC platform greatly simplifies the bookkeeping process for tax accountants servicing dozens of small businesses. Attracted by the large benefits, tax accountants have been actively marketing Kyungrinara to their clients and driving wider adoption of the services.

Retain BUY and target price of KRW32,000

We maintain our BUY rating and target price of KRW32,000 for Webcash. The company estimates the total addressable market for Kyungrinara at 200,000 accounts. With its current count at 48,000 user accounts, we see ample room for further expansion going forward. If the number of paying users exceeds the 100,000 mark, the company could also add various subscription services to Kyungrinara. With Webcash following in the footsteps of Douzone Bizon, which has built a strong economic moat through its focus on tax accounting firms, we urge investors to keep an eye on expansion of the WMC platform.