Labelled a “content champion” by analysts, GHY Culture and Media is among the newest additions to the Mainboard. In a bourse dominated by banks, REITs, telcos and the property developers, this entertainment company, with a market value of more than $700 million, is a refreshing change and something to consider for investors looking for diversity in their portfolio.
On Jan 19, UOB Kay Hian Research analysts Lucas Teng and John Cheong initiated coverage on GHY, with a “buy” call and target price of $1.08. This is a significant upside from its IPO price of 66 cents last December.
The target price is based on 18.5 times forward earnings, a ratio in line with other listed media production companies from China.
GHY, whose IPO last December was jointly managed by UOB Kay Hian and DBS Bank, is seen by the analysts to generate a three-year revenue CAGR of 56% between FY2019 to FY2022, and earnings to grow at 72% CAGR to hit $64 million for FY2022 in the same period.
The bulk of the company’s revenue now is from drama productions. However, concert production is seen as the segment driving growth, thanks to GHY’s trump card: Superstar singer Jay Chou.
From a low base of the Covid-19-hit 2020, Teng and Cheong expect GHY’s concert revenue to grow at a three-year CAGR of 243%. Between 2017 and 2019, Chou held 41 concerts and ranked first among all China singers in accumulated ticket sales for concerts in China.
See: GHY Culture & Media sets its sights on 'Nanyang'
“This gave GHY a formidable platform to undertake the production of more concerts and events,” the analysts note.
For now, GHY’s film and drama production remains the dominant business segment, making up 77–88% of the company’s total revenue between 2019 and 2022, with concert production making up the bulk of the remainder.
The dramas and films produced by the company, such as The Little Nyonya and Perfect Village, have achieved commercial success in China, notes the analysts. GHY also has a pipeline of up to 23 film and drama projects.
The analysts also highlight the “reputable team of industry veterans”, including executive chairman Guo Jingyu, who is a notable producer, director and scriptwriter in China.
See also: UOB adds GHY and Innotek to Alpha Picks portfolio, drops Sunpower, Frencken and Venture
GHY’s Singapore production team is led by former vice-president of Mediacorp, Yeo Saik Pin, an established director, scriptwriter and producer.
There is also non-executive director Yang Jun Rong, who manages Chou’s JVR Music label and presumably, is the key link between GHY and Chou.
The UOB Kay Hian analysts note that the company has been granted the rights to undertake the production of concerts for the Mandopop star in Singapore, Malaysia, Australia, Thailand, Japan and China, excluding Hong Kong and Macau.
GHY intends to expand its regional reach and strengthen its presence in the Asia-Pacific region, particularly Southeast Asia, by expanding its foothold in Singapore, say Teng and Cheong. “GHY believes that gaining access to wider audiences in Singapore and Malaysia will provide the group with exposure into new markets and opportunities for growth for its TV programme and film productions as well as concert production business.”
In addition, GHY has working partnerships with Shenzhen-listed Perfect World, which develops and produces TV shows, movies and online games in China, as well as a memorandum of understanding with Mediacorp to provide GHY with further opportunities to undertake more projects. As at Jan 26, Guo is the majority shareholder with 641.08 million shares, or a 59.7% stake, in GHY.
However, the company has also attracted investment from several prominent names and entities in the regional business and entertainment scene to be cornerstone investors of the IPO.
These include King Kong Media Production, owned by famous local comedian Mark Lee, and V3 Brands, led by Ron Sim, who has expanded his Osim massage chair seller into a multi-industry lifestyle group. Perfect World, GHY’s partner, is another cornerstone investor, as is iQIYI, a Nasdaq-listed subsidiary of Baidu that is in the media and distribution business.
