GHY CULTURE&MEDIA HLDG CO LTD (SGX:XJB)
GHY Culture & Media - 1H21 Results Below Expectations; Stay Tuned For A Better 2H
- GHY Culture & Media’s net profit declined to S$3.5m (-73% y-o-y) in 1H21. Excluding one-off adjustments as well as the concerts segment, 1H21 net earnings would have been down 14% y-o-y. Core drama revenue rose on a y-o-y basis; unfortunately, the effects of COVID-19 measures caused margins to dip.
- While concerts in 2021 appear to be unlikely with the emergence of the Delta variant, we think that there will likely be a strong pent-up demand once they are approved by the authorities. Maintain BUY on GHY Culture & Media with a slightly lower target price of S$1.05.
GHY Culture & Media's 1H21 results below expectations.
- GHY Culture & Media (SGX:XJB) reported a net profit of S$3.5m (-73% y-o-y), below expectations. 1H is a seasonally weaker period for drama productions. Excluding one-off gains and losses, as well as profits from the concert segment, GHY Culture & Media’s 1H21 net earnings would have been down 14% y-o-y.
- Core drama production revenue rose…1H21 revenue of S$43.8m rose (+18% y-o-y) despite the absence of contributions from concert productions. The group completed the filming of "Horror Stories of Dynasty Tang” in 1H21, while it has ongoing productions of another drama “Sisterhood” and online short-form video series “Whimsical World”.
- Overall, revenue from the TV & film production rose to S$40.6m (+86% y-o-y) while contributions from concert productions fell compared with 1H20 (pre-pandemic concert productions).
- …but the COVID-19 outbreak caused margins to dip on setup costs. Gross profit declined (-37% y-o-y, -66% h-o-h) while gross margins were at 28.1% (-12% h-o-h) as the group was affected by duplicated setup costs from the drama series “Sisterhood”. GHY Culture & Media had to progressively relocate certain filming and production activities to China for this drama’s production, given the Malaysian government’s movement control order from the rising COVID-19 cases, in order to ensure minimal disruption to the production timeline.
- Overall, GHY Culture & Media maintains that “Sisterhood” is still a profitable production.
Pipeline relatively intact, looking forward to 2H21 and beyond.
- GHY Culture & Media will be commencing five drama production series in 2H21. Management noted that one of these has recently commenced while the remaining are slated to begin in Sep and Oct 21. In addition, the group also saw an increase in contract assets of approximately S$19.4m in 1H21, due to drama and film productions that have been completed but not yet billed.
STOCK IMPACT
- New initiatives taking flight purchases offer a vote of confidence. GHY Culture & Media’s CEO Guo Jingyu has recently purchased 2.05m shares at approximately S$0.63/share.
EARNINGS REVISION/RISK
- Cut GHY Culture's 2021 earnings forecast by 46%, cut 2022 earnings forecast by 7%. We eliminate concert segment contributions for 2021 and cut the number of concerts scheduled for 2022 given that the Delta variant outbreak is a likely deterrent for large scale events in the coming months. We also reduce the number of drama production series and gross margin assumptions for 2021.
VALUATION/RECOMMENDATION
- Maintain BUY with a lower target price of S$1.05. We roll forward our concerts, which will likely see a strong pent-up demand. The group trades at an attractive 11x 2022F earnings.
- See
SHARE PRICE CATALYST
- Regulatory approval for the resumption of concerts.
- Contract wins for the production of drama series.
- M&As.
Lucas Teng
UOB Kay Hian Research
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John Cheong
UOB Kay Hian
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https://research.uobkayhian.com/
2021-08-17
SGX Stock
Analyst Report
1.05
DOWN
1.180
