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.
