UnUsUaL - UOB Kay Hian 2020-02-14: 3QFY20 Results In Line; Expect A Weak 4QFY20 Due To COVID-19

UNUSUAL LIMITED (SGX:1D1)

UnUsUaL - 3QFY20 Results In Line; Expect A Weak 4QFY20 Due To COVID-19

UnUsUaL (SGX:1D1)'s 3QFY20 results were in line as robust revenue contribution from JJ Lin and Eric Chou concerts helped boost earnings. However, UnUsUaL faces significant short-term headwinds as the ongoing COVID-19 situation dampens sentiment in the concerts industry.
We expect a weak 4QFY20 as UnUsUaL has postponed concerts that have been planned in 4QFY20. Hence, we slash our earnings forecasts for FY20-22.

Maintain BUY with a lower PE-based target price of S$0.32, implying a 52.4% upside from current price levels.

Three sold-out JJ-Lin concerts, including two at the larger-capacity Singapore National Stadium, along with two nights of Eric Chou concerts, have contributed strongly to UnUsUaL’s 3QFY20 revenue (+66.4% y-o-y) and net profit (+15.5% y-o-y).
Also, seven nights of the family-friendly Walking with Dinosaurs in Taiwan has also helped lift earnings. However, we expect 4QFY20 earnings to be weak due to the ongoing COVID-19 epidemic.

The ongoing COVID-19 epidemic has devastated demand for live events, such as concerts and fan meets, leading to massive cancellations and postponements. UnUsUaL, based primarily in the ASEAN region and with 80% of FY19 revenue from Asia, will face a weak 4QFY20 as planned JJ-Lin concerts in Australia and Hong Kong have also been postponed.
However, postponement of concerts implies that instead of UnUsUaL suffering from a total loss in concert revenue, revenue would instead be deferred to FY21 or later. Also, management is in discussions to hold new concerts in western markets like the US for the rest of 2020. This would help diversify UnUsUaL’s geographical revenue and soften the impact from the ongoing COVID-19 epidemic.

Due to the popularity and success of Disney on Ice shows, we reckon that UnUsUaL may further collaborate with Disney to carry out more family-friendly entertainment events in 2020 and beyond. We also expect UnUsUaL to bring in more family-friendly titles in 2020 and 2021 through partnerships with other global brands.

Due to the ongoing Covid-19 epidemic, the cancellation and postponement of concerts would dampen concert demand and impact UnUsUaL’s earnings. Hence, we cut our revenue and net profit forecasts for FY20-22. We expect UnUsUaL to suffer a small decrease in FY20 revenue (-6.2% y-o-y) and net profit (-8.3% y-o-y) before experiencing double-digit growth for both segments in FY21.
We forecast revenue at S$53.4m (from S$74.7m), S$66.4m (from S$88.1m) and S$75.7m (from S$98.7m) for FY20-22 respectively. Our net profit forecasts for FY20-22 are S$12.1m (from S$16.6m), S$15.1m (from S$20.9m) and S$17.6m (from S$24.2m) respectively.

Maintain BUY with a lower PE-based target price of S$0.32 (from S$0.44), based on 22.0x FY21F PE, pegged to regional peers’ 2020F PE average. UnUsUaL is currently trading at 14.3x FY21F PE, well below its long-term PE mean of 36.2x. We believe UnUsUaL should be trading near or on a par with its competitors due to its strong ROE and superior net margins compared to peers.
Our target price represents an upside of 52.4% from current price levels, representing a good opportunity for long-term investors when UnUsUaL rebounds from the COVID-19 crisis.
See UnUsUaL Share Price; UnUsUaL Target Price; UnUsUaL Analyst Reports; UnUsUaL Dividend History; UnUsUaL Announcements; UnUsUaL Latest News.

A slowdown or stop in the number of reported COVID-19 cases may lead to a rebound in the concerts industry.

More reputable brand names and artistes may approach UnUsUaL for lucrative partnerships.

Being a leading player in the ASEAN region, UnUsUaL may prove to be a valuable acquisition target.

Llelleythan Tan UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2020-02-14

SGX Stock Analyst Report BUY MAINTAIN BUY 0.32 DOWN 0.440