The conclusion in a picture
This will be a more light-hearted and less serious analysis of the upcoming IPO. Hence the timing of this post.
The 3rd IPO on the mainboard this year.
Public Application is from 11 December 9pm to 16 December 12pm.
Introduction
G.H.Y
Culture & Media ‘s business can be broken down into 4 Segments
1) Television
Program and Flim Production
2) Concert
Production and Management
3) Talent
Management Services
4) Costume,
Props and Make-up Services
At an IPO
Price of $0.66 per share, this results in a market cap of 708.7 million as
there will be 1,073,792,000 shares
outstanding post IPO.
Financials
As the company is newly
formed, with a short history tracking back to only 2018. It has earned 12.4
million in FY 2019 and 13.0 million in Half Year of 2020. This translates to a
PE of 57 based of 2019 numbers.
Based off a 26 million earning
in FY 2020 (13*2), this translates to a PE of 27. Which is a reasonable
valuation based off good growth numbers seen in its short track record.
However, this analysis
is too unrealistic as 超人不会飞.
The business segments of this company are largely project based and not a
stable business volume throughout the year.
|
Business Segment |
% of 2019 Revenue |
% of 2019 Segment Results |
% of 6M 2020 Revenue |
% of 6M 2020 Segment Results |
|
Television Program and Flim
Production |
92.22% |
89.33% |
58.90% |
57.12% |
|
Concert Production and Management |
1.55% |
2.5% |
39.78% |
41.03% |
|
Talent management service income |
2.20% |
12% (with costume segment ) |
0.376% |
1.83% (with costume segment ) |
|
Costume, make-up and props services |
4.03% |
12% (with talent management
segment ) |
0.937% |
1.83% (with talent management
segment ) |
Concert
Segment has done very well this year. Much thanks to 周杰伦 嘉年华 世界巡回演唱会 新加坡站 in January 2020 which was pre-covid. Following the Covid-19 that occurred
after that, it would be safe to say that this segment would not be contributing
in 2H 2020.
In terms of
television program productions, the company undergoes productions based on 3
revenue models
1) Customer
like TV Company engages them to produce a drama/flim. In this case they charge
a production fee.
2) Develop
their own drama/flim then selling it to customer for a fixed fee. In this
method, the cost and risk are more on the company.
3) Develop
their own drama/flim then selling it to customer for a variable fee. Based on
user clicks or viewership for each episode.
Based off
2019 and 2020 trends. (2) is the most common method used by the group. Although
in 2020 it has ventured to (3).
In terms of
balance sheet, it looks stable and fine. Although I am quite surprised by the
bank borrowings of 4.35% to 5.01%. Even though its not a huge amount, the short-term
bank loans at such a rate might signify that pre-ipo the company appears to be
a huge risk to the banks.
What I like
about the company
1) Strong
Know-how in the Business – The CEO himself is a director of flims and produces
his own flims. Has been in the industry for over 20 years and therefore should
not be remote to producing flims and budgeting it. Being in the China industry
means that he does not need to break into the China industry and understand the
red tapes.
2) Strong
Board Members- Non-Executive Director and Substantial Shareholder Mr Yang Jun
Rong is well respected in the music industry. Known as 荣哥, he is Jay Chou’s manager and is possibly
1 reason why the rights of Jay Chou’s Concerts would be given to GHY Culture
Media. As the saying goes, 做生不如做熟.
He also owns 45% of JVR Music. Fans of Jay Chou will not be unfamiliar to
that name as it is the company that releases music by Jay Chou.
3) Strong
Flim and Drama Pipeline upcoming. With 4 projects released in 2H 2020 as well
as 6 productions in 2H 2020. Coupled with 1 release and 7 productions in 2021,
it is safe to say that the pipeline not spectacular growth is already strong.
With more funds following the IPO, the company is likely able to undertake more
project and grow their profitability.
What I
Dislike about the company
1) Unfortunately
results for this year is unlikely to be as good even though it might show
growth from last year. This is due to Covid 19 making concerts obsolete in the 2H
of 2020. This means that the IPO is priced at a very steep PE. Assuming a more
realistic full year earnings of 20 million. It’s a PE of roughly 35. Which is acceptable
assuming concerts do return in 2021.
2) Need
for listing? Well I guess this company is doing quite well on its own and with
strong connections in the industry, the need for listing might not be needed in
fact.
3) Concert Management Revenue for Non Jay Chou Concerts are not as spectacular. With only 1 concert in 2019, the revenue came in at 1.2m and segment result being 0.469m. This means that the company will have to undertake more concert managements should there be no 周董效率(Jay Chou Effect)
Some
Mojito thoughts
2 Jay Chou
Concerts in Singapore netted 14m in Revenue and 8m in Segment Results. Should
Jay Chou tour China, 1 would wonder how much he can earn based on touring each
city. This should be bombastic.
2 upcoming
concerts in Malaysia and Australia in 2021. Should they both happen, it would
help in contributing to the bottom-line a lot.
Some 发如雪 thoughts
People
would like to take unusual productions and mm2 productions to compare towards GHY
Culture and Media. However, although both are media and concert production
companies, it is safe to say they are vastly different.
Unusual Productions
is by far a larger player in Singapore. MM2 focuses more on South East Asia, Taiwan
and Hong Kong flim productions. MM2 has also embarked on a more comprehensive
value chain model by integrating VR content production and Cinemas in its
business. Although the flip side is that this had made MM2 more asset heavy and
it has also took on more debt at a larger cost.
At this current
moment, GHY Culture and Media is not looking like MM2 nor Unusual Productions.
Conclusion
I believe
this IPO is a hit and run IPO. There seems to be strong demand and a
small public tranche. With Half Year 2020 already beating 2019 Results, it
might induce people to apply.
At current valuations,
it must show that it is able to undertake more projects and allow them to be at
a profitable scale as current before I would be convinced that it is worth such
valuations.
Of course,
opportunities such as a Jay Chou China Tour could happen and form the tailwinds
to this company.
But it will
be good to see the company getting involved in more concert productions in
China and Singapore apart from Jay Chou Concerts. I believe that will be where
the growth will come from. But until I see something more concrete, I would
have to refrain 千里之外 and 安静的听妈妈的话. 等待说好的幸福. 希望驚嘆號会在给我一首歌的时间后出现.
Some Basic Info(Apologies if they are not as accurate)
Listing Date: 3 December 2020
Offer Price: 0.93 SGD (93 cents)
Enlarged Share Capital: 230,390,000 Shares
Implied Market Cap : $214,262,700
Offer Size: Around 58 million Shares
Public Offer : 1,500,000 Shares
Dividends: At least 90% of net profit after tax for FY 2021 and FY 2022
Prospectus can be found here
Financial Info
Historic PE: 30.6
Half Year Implied PE: 28.9
Company Info
A company that speciliazes in credit reports. Providing to financial institutions and non financial institutions. Some of its customers include local banks as well as Singapore Commercial Credit Bureau.
These credit reports are needed for loan approvals as well as assessing an individual/ entity for their ability to undertake a loan.
The company has Singapore, Malaysia , Cambodia and Myanmar exposure. However, it has disposed off its Malaysia Unit as it was loss-making.
Perhaps unsurprising as well, Singapore contributes the most revenue and profit to the company. This is due to its market leadership in Singapore and Singapore being the most developed market among the 2.
What I Like about this Company
1) Relatively Resilient Line of Business
-Rain or Shine, loans will be needed and there will be a need to assess if loans are needed. As such there will always be a good demand for credit reports and related services. This can be seen in its Half Year Revenue which was largely stable despite Covid 19 and circuit breaker.
2) Dominant Market Leader in FI Data Business
-Company has 99.9% of market share in the FI Data Business. Being the market leader, it is likely that the revenue stream will be stable as the rival in this case is too far behind.
The company has also won the tender of operating the Moneylenders Credit Bureau from Ministry of Law. This will allow the company to further expand its reach in the FI Data Business as the current bureau is operated by its rival Experian. The tender victory would allow for a higher information sharing as more members are added.
3) Exposure to Myanmar and Cambodia
-Both are developing countries, with economy picking up in the future, the need for such credit reports would likely increase as well. This would bode well for Credit Bureau Asia as it is able to take advantage of the rise in affluence. On top of that Cambodia has been profitable since 2017
4) Organic Growth Seen
From 35.6 million in 2017 to 40.6 million in 2019. Its a decent 14% growth across 2 years. Despite Singapore being a relatively developed market already. As such, in a normal year, attaching a growth of 5-7% seems to be fair.
To add on, it has only about 43% market share of the Non FI Data Business(54 million estimated in 2019), which means should it gain market share and maintain margins, the growth can be higher than 7%
What I Dislike about the company
1) Structure of the company
-With 51% ownerships and joint venture structures, it has resulted in the company's non controlling interest earning bulk of the company's profits.
A deeper dig will reveal its other owners sharing the profits are large data companies like Dun & Bradstreet(2017 Revenue 1.74 billion USD) as well as Equifax (2019 Revenue 3.5 billion USD)
As such, one would wonder if these big companies decide to work with someone else, where would Credit Bureau Asia be? Since Credit Bureau Asia is unlikely to be a big fry to these companies.
2) The need for listing
-Looking at the balance sheet, the company does not seem to have a purpose for listing. It does not seem to have any financial difficulties. It has also not used any debt so far.
-It even paid out at least 10m each year. Which does not seem to indicate that they have any plans for a big expansion or acquiring a big rival or upwards/downwards intergration. Since if they would it is likely they would store cash instead
3) Malaysia Losses
-Malaysia has been unprofitable in 2017, 2018 and 2019. Although the company cited reason was competition from multiple players in the credit and risk information solutions industry in Malaysia, it is a good reminder that the company is not always successful to breaking into another country and the Non FI Data Business is still competitive even in Singapore as well.
Conclusion
-I feel that its worth applying, though its not for a long term hold. Probably just flipping on hype and craze as well as the markets recovering well in recent times.
-The small public offer will make placement shares look attractive and some folks might want to get into the market as it offers a dividend yield(around 3% likely) that is resilient
-In terms of long term prospects, i don't expect high growth of 30-40% in revenue year on year. However I think 5 to 10% each year will likely be possible. The growth will have to come from Cambodia and Myanmar in due course if things go the right way.
-As it is one of a kind IPO in SGX, there is no comparative PE to attach to. It would be unwise to compare it to the companies it is partnering as those companies have the scale and know-how.
-If i have to force fit a comparison, probably Vicom would be a company i would compare to due to its defensive nature. Hence a PE of about 20 would be ideal.
Markets Rally upon vaccine news.
However, the rally is mostly sectorial based, with
losses seen in some sectors.
Some would realise the gain on STI is larger than HSI. This is probably due to the sectorial mix. STI had more beneficiaries of the rally (mainly banks)
Key Beneficiaries
of the Rally
Airlines
and Aviation related (E.g SIA and SATS)
Banks (E.g
OCBC, DBS , UOB)
Hotels (E.g
City Development, Amara)
Tourism (E.g
Straco, Genting Singapore)
Property (E.g
City Development, Frasers Property)
Key Losers
of the Rally
Glove
Companies (E.g Top Glove, Riverstone)
Healthcare Related
(E.g Medtecs, Vicplas Intl)
Tech
Companies (E.g Tencent)
Tech
Manufacturing (E.g AEM)
Property
Management (E.g KWG Living, CC New Life)
E-Commerce
(E.g Alibaba, JD)
Game
Companies (E.g IGG)
Basically, apart from Property Management, the rest can be classified by Old Economy vs New Economy related.
Its quite subjective for Property Management to be classified in either one since it does not rally today nor does it rally largely when new economy counters rally.
Although my
view remains that today is probably a one-off and a reverse might occur based
on information released in the following weeks or months.
In the near
future should people be able to travel, it should reduce demand of the New
Economy but not render it obsolete. The thought of vaccine news out yesterday
affecting someone to not shop on 11:11 later or tomorrow does not really make
much sense.
In such
cases, I would stick back to looking at fundamentals.
The presence
of vaccine should reduce the excess demand for gloves, but it will still be
needed for administering of vaccines.
The presence
of vaccine should release pent-up demand for travelling but does not mean that
games and ecommerce would grind to a halt.
The trend
of increased usage property management because of the convenience they brought
in and the growth of property sector in China albeit slower should still stand.
Rain or Shine, a roof over the heads of people
would still be required.
Tech Manufacturing
should still continue as continued affluence should lead to increased use of
tech products.
Similarly,
just because one can fly in 2021(if possible), it does not mean that all hotels
and airlines would return to profitability. One must consider the price wars
that might happen between airlines. As well as the price wars between hotels.
Next, another consideration will be the environment the hotels operate in. A
company operating in a country with more people being vaccinated would most
likely do better than a company operating in a country with little or no people
being vaccinated yet.
If
travelling returns but economy being a laggard does not recover due to lower
numbers of travelling or unemployment being slow to pick up, interest rates are
unlikely to see a raise anytime soon and hence it would likely mean lesser bottom-line
for banks. Would this warrant an all time high for banks any time soon? Fortunately, Banks are not anywhere near their
all time high yet. But it is some food for thought
Would SIA look
cheap even if it returns back to 2019 earnings at the current price? It
probably would trade at a higher PE now then before its rights. But it just
rallies as per the broad news.
Overall:
Things may look very attractive as everyone starts pricing in a sooner than
expected recovery. But whenever such things happen, it means that there is a higher
chance of more volatility when the pricing in is wrong after more information
is released.
 |
| An example of Property Management Staff |
The link has been attached below.
Contents include
1) What is property management in China?
2) The business model of property management
3) How do property management companies get contracts?
4) What is the risk of residents self-managing the properties instead of the property management company doing it?
5) Why are we only discussing about property management companies now?
6) Who are the biggest players in the industry? Are they listed?
7) Valuation, Pros and Cons of Property Management ,
8) How I would evaluate one.
Link
https://drive.google.com/file/d/1u2JfIr-RYILs0ZN6j62WT7UKQgWduk1L/view?usp=sharing
Continuation of the previous post. The portfolio's results for September has came in.
Returns came in at 4.06%. Pretty good for an imaginary portfolio set up on 9 Sept.
Unfortunately i do not have the amount currently. But if i did it would look something like this.
Ums- In my opinion its a stable semi-conductor play with decent dividends. One of the few companies that has produced better results during the covid landscape as well.
Propnex- In the low interest rate landscape, the text book answer would be property. However choosing pure play developers are too difficult and might require more groundwork into various projects held by different developers. As such, it might not be bad to go with the market leader in the middle man industry of property in sg.....Propnex.
Yanlord Land- Cheap in book value terms, my personal bias is china property even though there has been recent curbs whereby the government is likely to set some restrictions such as net gearing has to be below 100% and unrestricted cash/ short- term debts has to be more than 1. The gross margins of Yanlord will come down but its sales volume has been increasing which is encouraging.
Top Glove- I added it for some thrill, personally its just allocating a part of the money to thrills. Though its not a position if i purchase, i would hold for a longer term than 9 months.
Powermatic Data- The 5G growth story should still hold despite a weaker 2H than 1H, while the recent capital reduction has somewhat been lackluster, earnings improvement should be the key driver in driving the value of the share price.
Ifast- Probably one of the most used portal to purchase funds, bonds etc. It has tremendous offerings on its portal and has been expanding in not just Singapore as well. Along side a possible digital banking license approval would likely mean that it becomes a one-stop financial services platform. The growth in assets under administration ( 12.5% in 6 months) is very remarkable. Recurring net revenue have shown growth which is good in adding consistency to its earnings
Hanwell- Under valued consumer goods play with packaging business in china that i particularly like a lot(tat seng). The recent buying of shares by insider at 23.5 cents has caught my attention as well.
Centurion- Did not declare a dividend in 1H despite stable results. Probably was the right thing to do as covid circling around its dorms had been talk of the town in 2020. I predict there will be stricter policies in the dormitories and companies such as centurion who are prepared will be able to take advantage of this by either charging a higher price as competitors are not allowed to operate due to being unable to meet the policies or centurion might be given more contracts to mange more quick build dormitories. The fact that Centurion has won the contract by JTC and there is a need for such dormitories is likely an indicator of demand for dormitories is present and centurion is probably a good supplier.
Tuan Sing - Recent proposed disposal of 39 Robinson Road will bring in a decent profit of around 1/3 of its market cap currently. The company is definitely worth more than its share price currently although it remains to be seen when more value will be realized. 1 example will be its Gul Tech that has done well in china recently.
KSH - As mentioned before in a post some time back, the gaobeidian thesis is still there although it will likely take a long period before all units are sold and as such the gains have to be 'discounted' in a way. It has moved into doing property developments via joint ventures and associated to obtain a higher margin. The main bread and butter business of construction has had solid order books although what the margins will be remains to be seen. Tender Price index have recovered since the lows of 2017 hence it remains to be seen if the recovery in tender price will improve margins. This company would be my pick among the construction companies as it has ventured into property development, has the highest exposure to gaobeidian and did not diversify too much into unrelated business such as education etc.
StashAway just announced that its cash management portfolio (Stashaway Simple) will be projecting a lower interest rate from Sept 1.
The rate will change from 1.9% to 1.4%.
While some would be surprised, i was totally not surprised at all.
Back in end of May i took a look and i was not convinced with the product.
Its stated on the stashaway website that its stashaway simple invest in 50% LionGlobal Money Market Fund and 50% in LionGlobal SGD Enhanced Liquidity Fund SGD Class I Acc
Its clear that the top 10 holdings have a relatively short expiration as stated by how a money market fund works.
As lower interest rate kicks in, the proceeds from these bonds will have to be reinvested at a much lower rate.
As such, it was a matter of time before returns start to come down.
Above is an example of a bond issued by Danga Capital Bhd which expires on March 2021. It has roughly 7 months left and the yield if you held it at ask yield is 0.576%. This is definitely lower than the rate of 1.9% or 1.4%.
To quote another example, PUB bond that expires in about 23 Months has a ask yield maturity of 0.42%.
This meant that should the funds decide to change their allocation from their PUB Proceeds that they obtain when the current bond expires on 26 October 2020, they would only receive an annual rate of 0.42%.
Which is clearly insufficient for 1.9% or 1.4%
Now moving on to the Enhanced Liquidity Fund,
From a glance, its quite clear that there are more focus on companies rather than governments. The fund has done well by having some of its top 10 holdings have 0% coupon rates which reduces the reinvestment risk.
However, one of its holdings Lend Lease Retail Invest might not be doing well as Lendlease Corporation has reported losses and the credit rating is currently BBB-. This means that should performance continue to be bad, a lower credit rating would have to be given and the fund whose aim is a weighted average portfolio credit rating of A- will have to switch holdings and potentially face a lower rate.
Will they face another negative revision in rates? Well that depends on a couple of factors. For example, will china cut their rates? will there be a prolonged credit crisis as businesses fail to recover from covid-19? will usa enter negative rates and will negative rates be a norm in future? Well these are just a few reasons i can think off the bat but i believe there are much more.
The takeaway from this is that its always important to read what the robo-advisors invest into and always be prepared that rates might fall.(Which is why they are 'projected' returns)
End of the day, the lower interest rate environment should result in investors looking for alternatives.
This can be in the form of equities, higher yield junk bonds, properties or simply spending their money away as the opportunity cost of holding cash is lower.
As for myself, i feel that i would be better off investing in equities that pay dividend instead of such bonds. The reason being is that the opportunity cost of cash or money market fund is very low now.
In addition, if i had liquid funds, i don't see a large difference putting it in a savings account that yields 0.5 to 1% compared to this fund. There are different choices out there as well and one could diversify into many different savings account (Cimb, Stanchart, Sing finance etc)
