Shares of South Korea’s internet portal giant Naver Corp. surged over 20 percent in August on a buying spree by foreign investors who have picked up 424.48 billion won ($383.97 million) worth of the company’s shares. Citing rosy outlook for the company’s mobile chatting app unit Line Corp. and the unit’s undervaluation compared to its global peers, a number of local brokerage houses have upped the parent company’s share target price.

Naver’s stock price closed at 845,000 won on the last trading day in August, 20.5 percent higher than the first trading session of the month on insatiable appetite of offshore investors for the internet portal giant, shifting away from market heavyweight Samsung Electronics Co. n Monday, its shares hit a new 52-week intraday high of 855,000 won before it ended up 2.3 percent, or 19,000 won, at 850,000 won from the previous session.

Yuanta Securities Co. on Monday raised its target price of Naver to 1 million won, following an upbeat guidance by other Korean stock brokers. Mirae Asset Daewoo Co. and Korea Investment & Securities Co. revised upward their target price for Naver to 1.05 million won, each, last Wednesday, while Meritz Securities Co. already upped the target to 1.1 million won at the end of July. Entering this month, Eugene Securities Co. and Kyobo Securities Co. also increased the target price of the company to 970,000 won and 990,000 won, respectively.

The positive outlook is driven by the growth potential of the company’s messenger app service Line. Kim Chang-gwon, an analyst at Mirae Asset Daewoo, said a recent survey showed Japanese young consumers use the Line app more than Yahoo Japan for news services as of July. Jung Yoon-ho, an analyst at Eugene Securities, said that Line’s market capitalization currently stands at about 10.2 trillion won, but it should be valued at about 17.6 trillion won. This suggests that Naver will likely remain attractive to foreign investors considering its undervaluation compared to other global mobile platforms.

Market analysts also agreed that Line’s strong performance advertisement sales have helped to propel its parent Naver’s stock price. Performance advertising is a tailored online ad that only appears to specific audiences that a company targets and is preferred by advertisers due eased uncertainties. According to Mirae Asset Daewoo, Line’s performance ad sales that reached 3.5 billion won in the fourth quarter ended December in 2015 jumped to 9.2 billion won in the first quarter of 2016. In June, its performance ad sales surpassed 10 billion won and are expected to top 40 billion won in the third quarter.

Only factor that would prevent further gains in Naver shares is net selling by Korean institutional investors that has continued since March. From March to August, institutional investors have sold Naver shares worth 548.9 billion won on a net basis.

By Chae Jong-won

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