Spackman Entertainment - RHB Invest 2017-08-16: Kicks Off First Acquisition Spree

Spackman Entertainment - RHB Invest 2017-08-16: Kicks Off First Acquisition Spree SPACKMAN ENTERTAINMENT GRP LTD 40E.SI

Spackman Entertainment - Kicks Off First Acquisition Spree

  • On 14 Aug, Spackman announced its proposed acquisition of Take Pictures, a start-up film production company founded by a veteran movie producer. 
  • Take Pictures currently has a strong line-up of 10 film projects. Acquiring this company would enable Spackman to expand its annual movie production capacity – which is in line with its commitment to continually seek acquisitions that strategically add accretive value to its existing movie production business.

Take Pictures was founded and is owned by veteran producer Mr Song Dae-Chan. 

  • Mr Song spent 13 years working alongside Spackman Entertainment Group’s (Spackman) chief producer, Ms Eugene Lee who is also the CEO of Zip Cinema. He began his career in 2002, apprenticing under Mr Kang Je-kyu, the director of classic hits like Shiri (1999) and Taegukki (2004) at the eponymous film company, Kang Je-Gyu Film Company. 
  • Mr Song continued his career at BOM Pictures, working with Ms Lee on the feature, A Bittersweet Life (2005), before joining her at Zip Cinema – where they collaborated on numerous projects for the next 12 years.

Increasing Spackman’s annual movie production capacity. 

  • Take Pictures, a a start-up motion picture production company founded by Mr Song, has developed and owns a strong line-up of 10 film projects. The projects include those co-produced with Spackman’s indirect, wholly-owned subsidiary Zip Cinema, like The Priests 2.

Golden Slumber slated for 2H17 release. 

  • Golden Slumber, a remake of the 2010 Japanese film with the same name, is based on a novel by Isaka Kotaro. The film is about a mail courier who is falsely accused of assassinating a presidential candidate. The movie will star A-list Korean artistes – Mr Kang Dong-Won plays Kim Gun Woo, the mail courier, while Ms Han Hyo-joo plays Sun Young, his first love and a traffic news announcer. Filming is already close to being completed, and the movie may hit the big screen by 2H17. 
  • Similar to Master, Golden Slumber is produced by Zip Cinema and will be distributed by CJ Entertainment. With Spackman’s proven track record, we expect this movie to be profitable. We also conservatively estimate (ie base case) 4m ticket admissions for this movie, which would likely yield a profit of USD2.6m for Spackman.

Undertaking a strategic review, embarking on more acquisitions.

  • Management said that it is reviewing future acquisition opportunities, and intends to reshape its business model to diversify its revenue stream. It would also aggressively pursue new acquisitions that enable Spackman to have a more consistent revenue stream and be less reliant on the box office performance of its movies. 
  • However, due to higher-than-expected marketing costs for Master, we cut our FY17F NPAT by 14.5%. Thus, our DCF-based TP drops to SGD0.23. Maintain BUY. 
  • The downside risk to our call is a poorer-than-expected reception to its movies.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-08-16
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.23 Down 0.270