Fresh from its listing last month, media company GHY Culture & Media has what it takes to become a “content champion”, say UOB Kay Hian Research analysts Lucas Teng and John Cheong in a Jan 19 note.
The analysts are initiating coverage on the Singapore-listed company, recommending “buy” with a target price of $1.08.
“GHY is a media company which focuses on the production of dramas, films and concerts. The company, which is led by notable China producer, director and scriptwriter Guo Jingyu, has a strong pipeline of up to 23 film and drama projects,” says Teng and Cheong.
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. According to Frost & Sullivan, Perfect Village ranked first in terms of viewership ratings (episodes 1-30), while The Little Nyonya ranked third (episodes 1-17) and first (episodes 18-45) in viewership ratings among all TV series broadcasted on TV channels during the same time slot. “With end-to-end production competency, GHY can maximise its production abilities,” they add.
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Stellar leadership
Teng and Cheong also note the company’s prominent leadership. “The group is led by Mr Guo Jingyu, a notable producer, director and scriptwriter in China with more than 25 years of experience,” they write. Guo recently won the Best Screenplay for ‘The Most Beautiful Youth’ at the 6th Wenrong Awards at the China Hengdian Film Festival in 2019.
GHY’s inhouse script production team is also led by Xiao Ji Xiang Tian, who won the Creator of the Year Award under the Novelty category at the iQIYI Web Film Festival in 2018.
The group’s Singapore production team is led by former vice-president of Mediacorp, Yeo Saik Pin, an established director, scriptwriter and producer.
In addition, the group has working partnerships with Perfect World, which develops and produces TV shows, movies and online games in China, as well as a memorandum of understanding with Mediacorp, providing GHY with further opportunities to undertake more projects.
The Edge Singapore reported last month that Guo was, from 2011 to 2018, a producer, director and scriptwriter with Perfect World Co, which is listed on the Shenzhen Stock Exchange and engaged in similar production work as GHY.
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GHY was formed through the collaborative efforts of Guo Jingyu, executive directors Yue Lina and Wang Qing, and non-executive director Yang Jun Rong, with the help of the Singapore-based group adviser, John Ho.
In 2017, Ho and his spouse, Lian Lee Lee, incorporated Perfect World Pictures (Singapore), later renamed GHY Singapore, with Guo appointed as the sole director. Perfect World, through its subsidiary, Perfect Credit Pictures (Singapore), became a 60% shareholder of GHY Singapore in September 2017.
GHY Culture and Media was established in 2018 following a couple of other rounds of restructuring that saw additional partners coming on board, including Yang, who is a veteran music producer. Guo is now the largest shareholder with a 64% stake, while Yang, Ho, Lian and Perfect World hold 8%, 13%, 3% and 12% respectively.
Mini-series
The growth of online video platforms has led to a similar growth of the web series market and an expanding market for short-form media, say Teng and Cheong.
The web series market size experienced dramatic growth at a CAGR of 23.9% between 2015 and 2019, increasing from RMB7.7 billion ($1.58 billion) to RMB18.1 billion ($3.71 billion) in 2019.
Meanwhile, the short-form video market in China reached RMB54.5 billion in 2019, yielding a CAGR of 159.6% between 2015 and 2019, note the analysts.
To this end, GHY diversified its online content product offerings by launching the production of its first online short drama series ‘Whimsical World’ in October 2020. It is a collection of 20 short drama series with 12 to 24 episodes per drama series, with each episode ranging five to 15 minutes.
X-factor
Aside from film and television production work, GHY has in Mandopop star Jay Chou an “X-factor” for their business, notes Teng and Cheong.
They add that GHY has a “formidable platform for growth” as it is poised to benefit from the resumption of concerts helmed by popular singer-songwriter Jay Chou. 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.
“From 2017 to 2019, Jay Chou held 41 concerts and ranked first among all China singers in accumulated ticket sales for concerts in China. This gave GHY a formidable platform to undertake the production of more concerts and events,” note the analysts.
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Outlook
GHY intends to expand its regional reach and strengthen its presence in the Asia Pacific region, particularly in 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.”
Guo purchased approximately 1.08 million shares at $0.63 to $0.675 per share from Dec 28 to 31, 2020.
At current price, GHY is trading at a discount of 13x 2021F price-to-earnings ratio (PE).
Teng and Cheong offer a 3-year projected revenue CAGR of 56% in 2019 to 2022F, driven by growth from the completion of drama productions. “Our assumptions for the number of film and drama projects as well as concert productions for 2020 to 2022 are detailed below. We expect a three-year CAGR of 47% from film and drama production revenue.”
“Overall, the strong revenue growth is due to the robust production pipeline and a three-year CAGR of 243% from concert production revenue (on low-base effect). The film and drama segment is expected to contribute between 77-88% of revenue from 2019 to 2022F, while the concert segment is expected to contribute between 11-20% of revenue in the same period,” they add.
The group is subject to risks, note the analysts, which include risks relating to corporate structure; risks relating to contractual arrangements; delays and cost overruns that may affect TV and film production; laws and regulations relating to distribution and censorship; concentration risk from its major customer; dependence on relationships with key agents, managers and artistes for its concert production business; claims to intellectual property, including infringement of third-party rights; and dependence on key management personnel for continued business success.
As at 10.51am, GHY is trading 1 cent lower, or 1.18% down, at 83.5 cents.
