DBS Group Research analyst Ling Lee Keng has downgraded her recommendation on G.H.Y Culture & Media Holding as its results for the FY2021 stood “drastically below expectations” on the back of Covid-19 induced delays.
For the FY2021 ended December, G.H.Y. Culture & Media Holding reported earnings of $3.9 million, down 90% from FY2020’s earnings of $38.1 million. The lower earnings were due to lower revenue contribution from the TV programme and film production business segment, said the company in their results statement on March 1.
The lower earnings were also due to the absence of revenue contribution from the concert production business segment.
During the FY2021, G.H.Y. only recognised revenue from the completion of three dramas, as well as the ongoing filming for one drama, one short-form video series, and three films. According to Ling, her estimates for the FY2021 included revenue from the completion of seven dramas.
While the group has a healthy production pipeline with more planning, preparation and the production of various drama and film projects, execution is still key, says Ling.
“The successful roll-out of the productions in the pipeline would be the key to seeing an improvement in the group’s financial performance,” she adds.
Following the lower earnings seen in FY2021, Ling has slashed her earnings estimates for the FY2022 by 71% to account for production delays. Her gross margin assumption is lowered to 30% and 32% for the FY2022 and FY2023 respectively, from her previous estimate of 35%.
In addition, she has lowered her projections to four dramas in the FY2022 from her original estimate of eight. For the FY2023, Ling has estimated six dramas for the FY2023. Concerts are also expected to return only in 2023, she adds.
“With the gradual reopening of the economies in Singapore, Malaysia, China and Australia, the group can look to hold previously postponed concerts and also to gradually roll-out the film and drama productions that are in the pipeline,” writes Ling.
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To this end, Ling has also slashed her target price estimate to 45 cents from 87 cents previously to reflect the “still challenging outlook”.
“For the key TV programme and film production segment, we peg the valuation to its peers’ average of 15x P/E. For the concert segment, we benchmarked it to UnUsUaL’s P/E of 20x on historical pre-Covid-19 earnings,” she writes.
“Though the worst could be over, [its] outlook is still challenging, with various movement restriction measures still in place,” she adds.
Risks to its share price performance include the impact of the Covid-19 pandemic outbreak, dependence on key management team and highly competitive industry.
As at 12.39pm, shares in G.H.Y. are trading flat at 42.5 cents, or an FY2022 P/B of 2.8x and dividend yield of 1.1%.
