At face value, GHY Culture & Media XJB had a clean-cut business model. It debuted on the Mainboard of the Singapore Exchange (SGX) in December 2020 with three key business segments: TV and film production; producing concerts; and talent management, costumes, props and make-up services.
However, travel restrictions and other Covid-19-related measures forced GHY to suspend many operations immediately after its listing. For FY2021 ended Dec 31, 2021, GHY reported earnings of $3.9 million, down 90% over FY2020.
GHY executive chairman and group CEO Guo Jingyu and his team have pivoted into various ventures — new ideas that the affable veteran director has been keen to discuss with The Edge Singapore recently.
This time last year, our interview was centred around GHY’s plans for the short-form drama to be shown on Douyin in China and TikTok in other countries. Guo had also teased the return of Mandopop singer Jay Chou’s international tours, organised by his group. Yang Jun Rong, Chou’s manager, sits on GHY’s board as its non-executive director.
Those plans materialised last year. “With the successful debut of Goddess Hotel on Douyin, we believe that GHY and Douyin have established a close-knit and trusted collaborative relationship. In 2023, we plan to combine Goddess Hotel with The Ferryman, another popular drama series in the mystery genre, to produce a short-form and long-form drama under a new intellectual property that viewers can engage with,” says Guo in a letter to shareholders in February.
On live shows, GHY organised Chou’s Carnival World Tour concerts in Singapore in December 2022, followed by Kuala Lumpur in January and Sydney in March. GHY also co-produced the Power Station and Guns N’ Roses concerts here last year.
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But GHY is not yet completely out of the woods. For FY2022, it reported a net loss of $9.4 million on the back of a 45% decline in revenue to $45.7 million. GHY says the overall net loss was mainly due to a foreign exchange loss of about $8.8 million arising from the appreciation of the Singapore dollar against the Chinese renminbi, as it has significant operations in mainland China.
Gross profit for the year was $14.2 million, down 34.9% y-o-y. Across business segments, the TV and film production business recorded a gross profit of $4.7 million, down 76.9% y-o-y, while talent management, costumes, props and make-up services saw a gross profit of more than half to $0.7 million.
GHY says the Shanghai lockdowns between March and November 2022 impacted filming for the drama Sisterhood. Filming was extended from March to May that year, resulting in higher costs.
The fall in gross profit from these two areas was partially offset by a rise in concert production gross profit of $8.9 million. In contrast, there was nothing from this segment back in FY2021 amid the pandemic restrictions.
Chou’s current world tour will play 16 dates across China this year, marking the singer’s first shows in the country after three years. Guo says 2024 will be a “big harvest” for GHY’s concert business as these big shows are brought to new cities on top of the traditional markets.
IP franchise, Jakarta production hub
On April 26, GHY announced that its indirect, associated company, Tianjin Changxin Film & Media, had entered into a co-production agreement with Nasdaq-listed video streaming platform iQiyi to film and produce the web drama series Strange Tales of Tang Dynasty 2: To the West.
Production commenced in March, and the series is a sequel to a drama released in September 2022, which GHY calls “one of the mostwatched” drama series of the year.
To realise the value of GHY’s intellectual property (IP) surrounding its original productions, GHY has embarked on an “IP franchise” business strategy. “The ‘IP franchise’ business strategy aims to create innovative content whilst retaining continuity, to make each production a recognisable part of a coherent franchise,” says GHY.
Encouraged by the success of Strange Tales of Tang Dynasty, GHY has identified the supernatural genre as part of this strategy, with plans for an immersive live-action game next. “Relying solely on drama and film production will generally only yield short-term positive effects without maximising the potential and economic value of our IP portfolio,” says Guo.
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Two other themes identified by GHY are the Nanyang and the mystery genres. Guo says the 2020 drama series The Little Nyonya notched strong viewership on iQiyi and Chinese national broadcaster China Central Television (CCTV). He adds this has piqued mainland Chinese interest in Southeast Asia’s cultural heritage.
GHY’s second drama series in the genre is Sisterhood, set to air this year after delays in filming last year. The script of a third drama series, Nanyang Transport Volunteers, is nearly complete and is scheduled to begin production in 3Q2023, with filming set to begin in 4Q2023.
This is not the first collaboration between GHY and iQiyi. In March 2021, GHY and iQiyi established a joint-venture talent management company, Uni-Icon Entertainment.
The name Uni-Icon appeared again late last year, but Guo clarifies that this is unrelated. In December 2022, GHY signed an MOU with e-commerce service provider F-Commerce to set up media production facilities in Jakarta. The Uni-Icon Media Network is set to be Asia’s largest short-form video production hub.
Guo says his production hub will provide professional cinematic capabilities to enhance the quality of short-form videos, which will then be mass-produced and monetised for the e-commerce market across China, Malaysia and Indonesia. The facilities will focus on short-form video and live stream creators, such as those on TikTok and Kuaishou, and Guo believes the location will become a popular spot for these web stars. Kuaishou, China’s second-largest shortform video platform after Douyin, emphasises live streaming more than the dominant player.
“We believe that the expansion across Southeast Asia in this new growth adjacency, with Indonesia as the springboard, will create opportunities for the group to expand globally as short-form videos continue to dominate social media platforms,” adds Guo.
Malaysia acquisition
The spate of corporate actions continues into 2023. On March 31, GHY announced that its wholly-owned Malaysian subsidiary had entered definitive agreements to acquire a Malaysian production company.
Granatum Ventures, a wholly-owned special purpose vehicle of Malaysia’s sovereign wealth fund Khazanah, entered into a definitive share sale agreement to divest its shares in Iskandar Malaysia Studios (IMS) to Studio Management Services (SMS). The latter is a consortium led by IMS’s current Malaysian management team in partnership with GHY and its subsidiary, GHY Culture & Media (Malaysia).
The sale will be for a 100% stake in the operating company, IMS, which is leasing the land where the studio premises are located from Tanjung Bidara Ventures, another wholly-owned special-purpose vehicle of Khazanah.
Under the share sale agreement, GHY will initially purchase an 80% stake in SMS for RM8.8 million ($2.62 million). Assuming conditions are fulfilled, GHY’s total investment in SMS will be approximately RM34.4 million, with an equity stake of 80%. The remaining 20% stake can be bought out by GHY in five years “at a price determined by the relevant terms of the shareholders’ agreement”.
As at Dec 31, 2022, the net asset value of IMS is approximately RM32 million. Several of the dramas and films produced by the group have been filmed and produced in Malaysia, including at the IMS facilities, says GHY, adding that the acquisition will enable the group to establish its own filming and production base in Malaysia.
Following GHY’s results briefing on March 14, DBS Group Research analyst Ling Lee Keng slashed her FY2023 and FY2024 earnings estimate by 70% to 80%, citing fewer projects, especially for the TV programme and film production segment.
However, Ling still sees a turnaround for GHY this year. In a March 15 note, Ling maintained “hold” on GHY with a slightly higher target price of 45 cents from 43 cents previously. From a net loss of $9.4 million in FY2022, Ling forecasts an FY2023 net profit of $4.90 million, and she believes this could nearly double to $9.13 million in FY2024.
For FY2022, GHY recognised revenue mainly from three dramas, one online short-form drama series and two concert productions. As at Dec 31, 2022, contract assets representing the group’s right to consideration for TV drama and film productions in progress stood at approximately $41.0 million.
Even with a healthy production pipeline, execution is still key, says Ling. “We project three or four dramas for FY2023 and FY2024, compared to three in FY2022.”
