Despite weak 1HFY2021 results, GHY Culture and Media has a strong pipeline that will strengthen its 2HFY2021, says DBS Group Research Ling Lee Keng
Ling is maintaining “buy” on GHY, with a lowered target price of 87 cents from $1 previously. The new target price represents a 38% upside.
“GHY Culture & Media’s weak 1HFY2021 results were mainly affected by the Covid-19 pandemic. Going forward, though the situation is still fluid, we expect a much stronger 2HFY2021. This is mainly due to the robust pipeline of projects and its strong network of business relationships with key industry players such as TV networks and video streaming platforms such as CCTV, iQIYI and YOUKU,” writes Ling in an Aug 13 note.
Earlier this week, GHY reported revenue of $43.8 million for 6MFY2021, up 17.9% from the year earlier period, thanks to higher sales of TV productions booked.
See: GHY Culture & Media's first half earnings down, expects 'strong' finish for the year
However, earnings dropped by 73% y-o-y to $3.5 million. The absence of a one-off gain from the sale of an associate in 6MFY2020 affected the bottomline as well.
Ling points to the company’s upcoming projects, a “healthy production pipeline for dramas, films, short videos [and] concerts”. “Content is king. We project seven to eight dramas for FY2021F/FY2022F, versus six in FY2020.”
“We expect the unleashing of pent-up demand for superstar Jay Chou’s concerts once the lockdown is lifted. This should lead to 21%/44% revenue growth in FY2021F/FY2022F. The group’s end-to-end production capabilities stand out among peers, and enables better control over costs and quality,” adds Ling.
For the key TV Program and Film Production segment, Ling pegs the valuation to peers’ average of 16.9 times price-to-earnings ratio (P/E). For the Concert segment, Ling benchmarks it to UnUsUaL’s P/E of 20 times on historical pre-Covid-19 earnings.
The current P/E trading multiples for FY2021F and FY2022F of 17.2 times and 10.7 times respectively are attractive against projected strong FY2020-FY2022F earnings compound annual growth rate (CAGR) of 26%, writes Ling.
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As at 2.30pm, shares in GHY are trading 0.5 cents lower, or 0.80% down, at 62.5 cents.
Photo: Albert Chua/The Edge Singapore
