Kakao family has lost as much as 36 percent in its combined market cap as retail stock investors` second favorite after Samsung Electronics and units under its umbrella turned into major disappointments this year.

The combined market capitalization of Kakao’s five publicly traded companies – Kakao, Kakao Bank, Kakao Pay, Kakao Games, and Neptune – came to 71.08 trillion won ($55.5 billion) as of Friday, sinking 35.7 percent from 110.5 trillion won at the beginning of this year.

Kakao, operator of Kakao Talk, a mobile messenger used by almost everyone in Korea uses, saw its market cap plunge 27.3 percent this year to date. Digital payment app Kakao Pay and video game developer Neptune have seen their market value halved in just five months into this year. Digital-only lender Kakao Bank suffered a plunge of 34.8 percent in market cap and game publisher Kakao Games 39.6 percent over the period.

The stocks are performing at 52-week lows.

Early Monday, shares of Kakao traded 1.34 percent higher at 83,000 won, rebounding from a fresh 52-week intraday low of 80,300 won last Friday. Those of Kakao Bank rose to 39,000 won, its IPO price, from 38,450 won in the previous session. Kakao Pay traded at 87,000 won, bouncing back slightly from the last session but still below its IPO price of 90,000 won. Neptune also touched a new 52-week low of 13,850 won last Friday, although the stock recovered to 14,300 won Monday morning.

This year to date, foreign and institutional investors have net sold a total of 2.8 trillion won in Kakao family stocks. They dumped 1.7 trillion won in Kakao, 626.8 billion won in Kakao Bank, 360.1 billion won in Kakao Games, 183.0 billion won in Kakao Pay, and 6.6 billion won in Neptune.

Kakao families had been among the top buy stocks over the recent two years on expectations for their strong growth potential. Kakao Bank and Kakao Pay, which made blockbuster market debuts during the Covid-19 crisis, had their share prices jump 142 percent and 176 percent, respectively, versus their IPO prices.

But as liquidity continues to shrink from major central banks’ monetary tightening measures, investors are moving away from tech and growth stocks to place their money into companies with solid earnings, not just promising potential.

Kakao Bank and Kakao Pay have been embroiled in overvaluation criticism since their debut, with their estimated price-to-earnings ratio (P/E ratio) for this year still exceeding 50x. P/E ratio measuring a company’s current share price relative to its earnings per share, with higher P/E ratio generally considered as overvalued and vice versa.

Kakao Bank’s estimated P/E ratio currently stands at 57x and that of Kakao Pay at 645x, way above top internet stock Naver’s 36x and top financial stock KB Financial Group’s 4.9x. Kospi’s 12-month forward P/E ratio stands at 10x.

Kakao’s plan to list Kakao Mobility and Kakao Entertainment could reduce the parent company’s value or restore its value depending on the market condition, said Seo Jung yeon, analyst at Shinyoung Securities.

By Cha Chang-hee and Cho Jeehyun

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