KGI Research analyst Simeon Ang is starting UnUsUaL Limited at “outperform” with a target price of 19.2 cents.
“Our range is derived from FY+1/+2 peer P/E valuations as well as base/bear discounted cashflows. Our discounted cash flows (DCFs) considered [a] weighted average cost of capital (WACC) of 8.3%-8.7% and terminal growth rate of 1.8%-2.2%,” the analyst writes.
In his report dated June 20, Ang expects the live entertainment producer and promoter to return to the black in the FY2023 with projected revenue of $45.6 million and PATMI of $5.2 million.
“[This marks] a stunning turnaround from FY2022’s [revenue] of $3.6 million and [loss of] $4.2 million respectively," he writes.
UnUsUaL, which had seen two years of forced hibernation due to the Covid-19 pandemic, is now “on the cusp of a recovery” from both a demand and supply perspective, says Ang.
According to trade publication for the concert and live music industry Pollstar, ticket sales in the first quarter of 2022 have recovered to US$1.09 billion ($1.51 billion) from the US$30 million seen in the corresponding period the year before.
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“Nonetheless, there is [a] US$0.9 billion to US$1.3 billion gap from pre-pandemic levels, which is presumably left for Asia to fill as the region has only recently started to lift pandemic curbs,” Ang notes.
“Data from Google tallies with our prognostication as UnUsUaL’s key primary markets start to see marked action both on search trends and mobility,” he adds.
On the supply side, artistes are also revving up tours across cities to reach out to their fanbase and “remain relevant”.
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“In terms of pipeline, UnUsUaL has already announced a bevvy of tours in [its] home market, Singapore. Based on announcements as well as UnUsUaL’s track record, we believe that UnUsUaL has essentially secured 27.3% of our FY2023 ticket sales forecasts,” says Ang. “This gives us confidence that as more markets open, UnUsUaL would be able to potentially better our conservative numbers.”
Before the pandemic, the company had 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,” he adds.
To this end, Ang believes that UnUsUaL is the “best-in-class play” on the Singapore Exchange (SGX) in terms of live entertainment.
The counter’s implied FY2024 P/E of 18.4x is inexpensive and “premised on recovering fundamentals as well as track record in bringing in artistes with wide and established fanbase”.
To the analyst, the biggest risks to the company’s performance are the reimposition of Covid-19 curbs and show cancellations.
“Other risks include weaker-than-expected discretionary spend, potential oversupply of live entertainment events that may sap out fan demand, cannibalisation of fan demand by online streaming, and shareholder dilution from potential equity fundraising,” he says.
As at 12.28pm, shares in UnUsUaL are trading 1.2 cents lower or 7.79% down at 14.2 cents.
