Two years after listing on the Singapore Exchange (SGX), GHY Culture & Media is thinking big by filming shorts. The film and concert production company is venturing into creating short-form videos, which will not be aired in theatres where attendance numbers have been ravaged by the pandemic. Instead, GHY’s series will be shown on Douyin in China and TikTok in other countries, where mobile penetration and user counts have only grown.
Goddess Hotel, the first short-form video produced by GHY with Douyin, is now in post-production. It will be the first short-form video produced by GHY to be released on TikTok, and is expected to premiere in April.
Phoning in from Beijing, GHY executive chairman and group CEO Guo Jingyu says he expects short-form video to be a key revenue and profit contributor going forward, alongside its current film and concert business segments.
While he declines to reveal projected profits, Guo points to monetisation opportunities like advertisements and e-commerce marketing.
In a letter to shareholders on March 3, two days after GHY’s FY2021 results, Guo wrote: “We anticipate that the establishment of our own short-form video channel on leading platforms, including but not limited to Douyin [and] TikTok, could further diversify our revenue streams via the various subscription methods and could attract other sources of revenue.”
FY2021 'way below expectations'
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The pivot comes at a critical time for GHY, whose business model has been facing a trial by fire due to Covid-19. For the FY2021 ended Dec 31, 2021, GHY reported earnings of just $3.9 million, down 90% over FY2020. Revenue, meanwhile, was down 34% to $83.3 million.
GHY’s share price has reflected investors’ wariness for this stock this past year. At its December 2020 IPO, GHY shares were offered at 66 cents. The share price went up to as high as 84 cents the following month. However, it was all the way down soon after.
The company tried to signal its optimism by undertaking a series of share buybacks starting from December 2021. As of March 23, it bought back around 2.4 million shares allowed under the current mandate. Guo has personally bought more shares from the market too, most recently on Sept 14, 2021, when he paid an average of 59.7 cents for 138,300 shares. GHY closed at 47 cents on March 23, giving it a market cap of around $500 million and valuing the company at around 130 times earnings.
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On March 4, DBS Group Research analyst Ling Lee Keng downgraded GHY to “hold” from “buy”, citing a challenging outlook. She also nearly halved GHY’s target price to 45 cents from 87 cents previously.
“FY2021 results are drastically below ours and the consensus,” says Ling. “We have slashed our earnings estimates for FY2022F by 71% to account for the delay in production due to the pandemic.”
Across segments, GHY also reports granular figures in three key areas: TV and film production; concert production; and talent management, costumes, props and make-up services.
Firstly, revenue from its TV and film production business decreased by approximately 30.2% y-o-y to $75.7 million in FY2021. From filming schedules to theatre restrictions, nearly all stages of the film production have been paralysed by various lockdown measures in the region.
In FY2021, GHY completed filming of three dramas, which are now in post-production. In addition, Sisterhood — the second Nanyang-themed drama after GHY’s The Little Nyonya remake — is nearing completion and is expected to be released in FY2022.
Last year, GHY recognised revenue for the completion of three dramas, ongoing filming for one drama, one short-form video series and three films. Ling of DBS was expecting seven dramas for the period. This is in stark contrast with FY2020, where GHY saw revenue from six dramas, one film series, ongoing filming for two dramas and one online short-form video series.
GHY has implemented various measures to speed up the production of dramas and films. Some of these measures include movement restrictions for artistes until filming is complete, reducing time lost to quarantine. The company is prepared to resume production for various projects in Yunnan, Malaysia and Singapore, says Guo.
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Ling notes that films and drama productions in progress increased by 154% y-o-y to $22.7 million in FY2021, while trade and other receivables was up 75%, to $48.1 million, mainly due to pre-payments made for drama productions and billings.
Contract assets, which represent the group’s right to consideration for drama and film productions in progress but not yet billed, also grew by 11.5% to $59.3 million in FY2021.
With conditions for full-fledged production still uncertain, Ling expects GHY to produce just four dramas this year, from an earlier estimate of eight dramas. For 2023, she expects six dramas to be produced.
Growing the smallest segment
It was not a uniform decline for GHY’s results, however. Its FY2021 revenue from the talent management, costumes, props and make-up services segment doubled y-o-y to $7.6 million.
Historically a small sliver of the company’s business, GHY scored a win to provide costume and make-up services for performers at the Beijing 2022 Winter Olympics opening ceremony, by way of designer Chen Minzheng. “Chen is an award-winning costume designer with many years of experience in this industry. GHY has an exclusive collaboration with him,” says Guo.
However, Guo declines to disclose GHY’s share of profit and revenue from this project, preferring, instead, to point at the brand-building from GHY’s involvement in the high-profile event. “I think this is more of a recognition of our ability and reputation in this industry,” he adds in Mandarin.
In March 2021, GHY and iQiyi established a joint-venture talent management company named Uni-Icon Entertainment, with Tay Ping Hui and Dai Xiang Yu (formerly Dai Yang Tian) among its stable of stars.
A talent search programme to fill its ranks has been put on hold owing to the pandemic, but Guo says the company aims to sign “no less than 30 artistes”.
In addition to actors and musicians, Uni-Icon is now also on the lookout for web stars and influencers across Southeast Asia. This will align with GHY’s social-first, short-form video content strategy, says Guo.
Live shows on hold
Most strikingly, FY2021 revenue from the concert production business was absent, compared to revenue of $14.8 million from two concerts held in FY2020. When the company marketed its IPO, one selling point was that it has been organising concerts of Jay Chou, dubbed by some as “King of Mandopop” for staying in the A-list for nearly two decades. Yang Jun Rong, Chou’s manager, sits on GHY’s board as its non-executive director.
Guo is cautiously optimistic that concerts can resume in FY2022. Preparations are underway to organise concerts for Chou in Australia and Malaysia in 2023.
While GHY has signalled that it is exploring virtual concerts, Guo says these are better suited for newer artistes. “With any new development, we also need the artiste to accept the format. We needed time to assess it, as 2021 was a little too early.”
Putting on live shows is a big commitment. Guo adds: “I never focus on short-term goals; we don’t take shortcuts. Planning concerts to coincide with future releases requires a long horizon, and only high-calibre artistes can execute this.”
Leveraging on its original intellectual property, GHY has also been staging musicals in China. “The rollout of musicals has allowed GHY to increase outreach and publicity for our popular productions, while capitalising on the pent-up demand for live performances in China,” says Guo.
Revenue from musicals is not reported under the concert segment, and contributes less than 10% of the group’s revenue and net profit before tax. GHY’s first original musical, Ferryman: Eternal Life, has been staged for two national tours, while Horror Stories of Tang Dynasty will debut in 2Q2022.
GHY plans to produce a new original musical every year. According to Guo, the long-term plan is to stage two musicals around the world at all times, while keeping four to six recurring productions on hand.
Aside from GHY’s business segments, Guo has set his sights on expanding in Indonesia. GHY is working on translating short-form videos from Douyin into Bahasa Indonesia, to be broadcast via TikTok.
“With its huge population, Indonesia seems like the early days of China,” says Guo. “I definitely think there are a lot of monetisation opportunities from the short-form videos that we plan to broadcast.”
GHY will also explore filming drama series in Indonesia. “Culturally, we hope to bring China into Indonesia, and bring Indonesia into China,” says Guo.
