UnUsUaL Limited - KGI Securities 2022-06-20: Without Song Or Dance, What Are We?


UnUsUaL Limited - Without Song Or Dance, What Are We?

  • After two years of forced hibernation, UnUsUaL (SGX:1D1), a live entertainment producer and promoter, is on the cusp of a recovery from both a demand and supply perspective. Pre-pandemic, UnUsUaL produced and promoted more than 20 shows across over 10 cities annually. We see scope for UnUsUaL to return to such levels in the near-term and advocate investors to build long positions in this unnoticed recovery trade.
  • We expect UnUsUaL to return to the black in FY23F with revenue/PATMI of S$45.6m/S$5.2m, a stunning turnaround from FY22A’s S$3.6m/-S$4.2m. Subsequently, we pencil in 4-year revenue/PATMI CAGRs of 28.1%/54.5% on reattainment of pre-pandemic margins.
  • We initiate coverage on UnUsUaL with an OUTPERFORM recommendation and a blended peer and DCF-backed target price of S$0.192 apiece.

Live Entertainment on cusp of demand revival here

  • UnUsUaL is awakening to an environment where fan demand for live entertainment is reviving, and artistes are looking to capitalise on a resurgent discretionary spend. With a track record of producing and promoting live music events for over 25 artistes, we expect UnUsUaL to produce and promote at least 12 live music events in FY23F. We reckon that this will ultimately grow to pre-pandemic levels by FY24F.

After lagging the West, Asia is now ripe for demand boon.

  • Pollstar notes that globally, 1Q22 ticket sales have recovered to US$1.09bn from 1Q21’s US$30m. Nonetheless, there is US$0.9-1.3bn gap from pre-pandemic levels, which is presumably left for Asia to fill as the region has only recently started to lift pandemic curbs.
  • Data from Google tallies with our prognostication as UnUsUaLs key primary markets start to see marked action both on search trends and mobility.

Artistes are also revving up tours.

  • On the supply side of the equation, artistes are also stepping up their plans for tours across cities to reach out to their fanbase and remain relevant. In terms of pipeline, UnUsUaL has already announced a bevy of tours in home market, Singapore.
  • Based on announcements as well as UnUsUaL’s track record, we believe that UnUsUaL has essentially secured 27.3% of our FY23F ticket sales forecasts. This gives us confidence that as more markets open, UnUsUaL would be able to potentially better our conservative numbers.

Financial Analysis: What to expect from UnUsUaL over the next 4 years

  • In our base case scenario, we forecast UnUsUaL to return to profitability in FY23F.
  • There are three key drivers of UnUsUaL’s financials over the next four years, namely,
    1. number and scale of live events produced and promoted,
    2. average ticket prices, and
    3. breakeven costs.
  • In our base case scenario, we have assumed 12/15/18/21 concerts and 3/3/3/3 special functions across UnUsUaL's FY23F/24F/25F/26F.
  • On blended ASPs, our starting point was S$160/ticket and built in a 4-year CAGR of 4.1%, which in our view is conservative given LYV’s experience of double-digit y-o-y growth this year.
  • On breakeven costs, we have assumed that UnUsUaL's core EBIT margins will turnaround in FY23F to 14.9% (FY22A: -92.4%) and attain pre-pandemic levels of 21.7% in FY24F.

Promotion business unit to underpin UnUsUaL’s 5-year revenue CAGR of 137%.

  • UnUsUaL is revving up its business in a post-pandemic world. Currently its Promotion business strategy is focused on three lion’s share of revenue with 86.7%-87.3% from FY23F to FY26F.

Valuation & Action:

Simeon Ang KGI Securities Research | https://www.kgieworld.sg/ 2022-06-20