Bring the noise: Are investors still in tune with entertainment stocks?

Among the big names coming to town are American hard rock icons Guns N’ Roses — best known for anthems like Sweet Child O’ Mine and November Rain — performing at the Singapore National Stadium on Nov 12.

But amid the excitement, some fans grumble about poor planning and underwhelming production, especially at a recent show.

One 26-year-old who attended American singer Billie Eilish’s concert in August wonders if promoters have “forgotten how to organise concerts” after the two-year hiatus.

She remembers concertgoers were still being let into the Singapore National Stadium at 8pm when the concert was slated to begin. “I saw on social media that groups had started to queue from as early as 6am, but my friends and I weren’t concerned about being near the stage … We did manage to get in before the concert started, but it was quite a surprise to see such long queues when we got there,” says the public relations manager at a market research agency, who declined to be named.

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While her tickets were for the standing pens, others who had bought seated tickets found themselves much further from the stage than expected. “People I knew in the best-tiered seats complained of poor views and how there was a huge unused space between the standing pen and seats,” she tells The Edge Singapore. The Singapore National Stadium can seat 55,000 people at total capacity.

There were also safety concerns, she adds: “At one point in the show, Billie asked for the security’s attention as concertgoers near the front were fainting, but I’m not sure if those were due to crowd management issues.”

With the financial and logistical impact of Covid-19, she wonders if organisers are struggling with other constraints behind the scenes. “I’ve attended shows at the Sports Hub pre-Covid-19, which I’m sad to say felt better managed and were generally better experiences than this latest concert. Perhaps there were some operational difficulties among organisers; it has been long since large-scale events like this have occurred.”

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Eilish’s Singapore concert came just days after her show in the Malaysian capital of Kuala Lumpur, part of a six-stop Asia leg on her Happier Than Ever world tour. There, concertgoers complained that organisers had delayed their entry into Bukit Jalil Stadium, which can seat more than 80,000 people.

Plagued by low ticket sales, fans were upset that seats were much further away from the stage than had been advertised, while the standing pens were empty.

The concerts were organised by US company Live Nation Entertainment, which did not respond to questions sent by The Edge Singapore.

But not everyone had a bad experience: One fan at the National Stadium show “definitely enjoyed” the night, praising Eilish’s vocals and stage presence.

Still, crowd control “wasn’t the best”, says the 27-year-old fitness instructor, who declined to be named. “My friends and I were quite lost outside. We just followed the crowd and got directed to different queues.”

She had spent more than $200 to enter the standing area. “The stage wasn’t elevated enough, so I was either standing on tip-toes to try and catch a glimpse of her or just watching through the big screens.”

Spending power

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With more concerts and sporting events returning to these shores, young adults are more likely to spend on live entertainment than other age groups.

In an online survey of 1,050 Singaporean residents conducted by YouGov in June, nearly a third (29%) of those aged 18 to 24 said they would spend more on live entertainment now than last year.

Four in 10 (42%) said they would spend about the same this year, while 29% said they expected to cut back on live entertainment spending.

Still, respondents aged 25 and above proved increasingly thrifty with age, with six out of 10 (64%) people above 55 saying they would spend less on live entertainment than they did last year.

Despite hearing about the bad experiences at Eilish’s concert, Firdaus Firlany bought tickets to another gig at the Singapore National Stadium — one by Canadian pop singer Justin Bieber on Oct 25.

“The pandemic has taught me that there may be no ‘next time’, so whenever possible, [I should] take a chance and go for it. After two years of not travelling, I realised I took all these opportunities around me for granted. I used to think that concerts were a waste of money, but now I realise people go for the experience,” he tells The Edge Singapore.

At $298 for a seated ticket, Bieber’s show is set to be the 27-year-old’s first concert experience. “I think it’s quite reasonable, given that there weren’t any concerts over the past two years. The pandemic also taught me the value of time over the value of money. Money can always be earned, but time and experiences you’ll never get back.”

Firdaus may have to wait even longer for his first concert: In a Sept 7 Instagram post, Bieber announced a break from touring “for the time being”, citing health issues. Earlier this year, he was diagnosed with Ramsay-Hunt syndrome, a rare disorder that causes facial paralysis. “I’m going to be ok, but I need time to rest and get better,” wrote Bieber.

That same day, promoters AEG Presents and UnUsUaL Productions, part of Singapore Exchange (SGX)-listed UnUsUaL Limited, said the Singapore show will go on. “We are aware that Justin Bieber has decided to take a break from touring ... Our understanding is that the Asia leg of the tour is set to continue as scheduled.”

Like thousands of ticket holders, Firdaus is rolling with the punches. “Something the pandemic has taught me is that nothing is set in stone, no matter how much you’ve prepared for it. Even if Justin says the concert is back on, I won’t get my hopes up.”

He adds: “I have faith that if there is an actual cancellation, I’ll be able to get my money back. So, I’m not too affected at all — just keeping my fingers crossed.”

Entertainment shares surged briefly

So strong was the demand for concerts that a mere announcement in March lifted the share prices of three locally listed companies.

Shares in entertainment stocks mm2 Asia, UnUsUaL Productions and GHY Culture & Media surged between 6.38% and 11.86% on March 24, after Singapore announced an end to restrictions on all live performances, including theatre shows, concerts and street busking.

Concert producer and promoter UnUsUaL Productions’ shares continued to rally in the week starting March 29, when restrictions were lifted, reaching 14.7 cents on April 4, up from 12.4 cents on March 23.

Likewise, shares in media production company GHY reached a ytd high on April 19, closing at 59.5 cents, up from 47 cents on March 23.

That sector-wide rally proved unsustainable, especially after a reality check during results season.

The pandemic disruptions of the past two years have dealt a heavy blow to the finances of these companies. In May, mm2 Asia and UnUsUaL Productions reported net losses of $42.1 million and $4.2 million, respectively, for the FY2022 ended March.

Both companies had halved their losses from FY2021, with mm2 Asia improving 57.7% y-o-y and UnUsUaL Productions closer to the black with a 54.8% y-o-y increase.

Media production company mm2 Asia acquired UnUsUaL Productions in 2016 and later listed it on the SGX Catalist board in April 2017.

The current financial year may see both companies emerge from the red. On May 28, UnUsUaL Productions presented Singapore’s first large-scale, indoor live concert since Covid-19 with Taiwanese singer A-Lin’s show at the Singapore Indoor Stadium, which has 12,000 seats.

Bieber’s tour date aside, UnUsUaL Productions is also behind concerts by Mandarin pop singers Eric Chou and JJ Lin. Chou played at the Singapore Indoor Stadium on Sept 10 and 11, while Lin will perform at the Singapore National Stadium on Nov 4 and 5.

UnUsUaL Productions’ CEO Leslie Ong claims ticket sales for the upcoming shows are “quite close to pre-pandemic days”. “Audiences are probably spoilt for choice with the many concert offerings.” The past two years have been tough, he adds. “Most of our partners managed to pull through and remain relevant. We do not need to make massive changes in our work arrangements.”

Adds Ong: “Post-Covid-19, Singapore has done well and is seen as a destination of choice for many future mega events and concerts. We are still a top choice for tourism in Southeast Asia, and this will help a new market segment: Concert and show tourism. We are optimistic about the post-Covid-19 mega-concert industry, and we believe, barring unforeseen circumstances, that we will be able to ride on the growth opportunities.”

Meanwhile, mm2 Asia’s FY2022 results are based on the group’s businesses working under a “pandemic-constrained environment” with no concert activities, while cinemas operated at reduced capacity and many vital markets were not yet fully open. “These business conditions have improved or completely alleviated since April.”

mm2 Asia’s founder and CEO Melvin Ang says: “We have faced enormous challenges in the past two years since the Covid-19 pandemic began. The financial results show that there is indeed light at the end of the tunnel. Although we have been severely tested, we have demonstrated the sustainability of our businesses and our standing as a major content and entertainment company in Asia. As the markets bounce back, we are poised to recover lost ground and continue to grow our businesses in the region.”

Return to form

GHY’s revenue and gross profit both plunged in 1HFY2022 ended June. Revenue fell 53% y-o-y to $20.6 million, while gross profit fell 59% to $5 million. The company sank into a net loss of $1.78 million for the period, reversing from a net profit of $3.4 million last year.

GHY says the appreciation of the Singapore dollar against the renminbi led to a foreign exchange loss of $2.7 million for the period. Excluding foreign exchange losses, adjusted net profit for the period would have been $0.9 million, says GHY.

GHY’s business is divided into three segments: Television and film production; concert production; and other services like talent management, costumes, props and make-up.

The tightened Covid-19 measures in China “significantly delayed” contract signing and production, says GHY at its 1HFY2022 results on Aug 11. These lockdowns and general inactivity in China led to a plunge in revenue from the TV and film production business segment and talent management, costumes, props and make-up services.

The company’s SGX debut in December 2020 came at a challenging time. In its first financial results, GHY’s concert production segment reported revenue of $14.8 million from two concerts held in FY2020. After that, the segment stopped contributing revenue for three consecutive half-year periods.

However, GHY’s 2HFY2022 could be a return to form. Taiwanese rock duo Power Station played the Singapore Indoor Stadium on Aug 20 with GHY’s support. Despite its dominance in the Mandarin entertainment circuit, the Nov 12 Guns N’ Roses concert is jointly organised by GHY and Australia event promoters TEG Dainty.

On Dec 17, GHY will stage a two-night, sold-out show by Mandarin pop singer Jay Chou at the Singapore National Stadium. GHY says it sees significant demand for concerts post-pandemic, and the company reports strong ticket sales for its upcoming shows.

GHY executive chairman and group CEO Guo Jingyu says its ability to produce and co-invest in three concerts in the second half of the year demonstrates the group’s strong relationships in the entertainment ecosystem.

He adds that the resumption of the concert production business complements the group’s second growth engine and will assist the group in bringing sustainable value to its shareholders.

When GHY marketed its IPO, one selling point was the company’s history with Chou. Chou’s manager Yang Jun Rong sits on GHY’s board as its non-executive director.

“Jay Chou concerts have always been well sought-after, even before the pandemic,” Guo continues. “To cope with the significant pent-up demand, we offered more tickets for the highly-anticipated Jay Chou concerts in Singapore as compared to 2020, and both shows were sold out.”

Outside of Singapore, GHY is behind Chou’s sold-out Malaysia tour date on Jan 7, 2023, and an appearance at the Giants Stadium in Sydney, Australia, on March 4. At press time, tickets for the Australian date have sold out.

In the meantime, Guo says GHY was “well-prepared” for a phased reopening of Malaysia, Singapore and Australia, and the group maintains “a small team of staff” for its concert production business to optimise costs.

He adds that there were no significant changes in organising and marketing these concerts besides the slight additional cost incurred for implementing safety measures. “We are thankful that our key suppliers and partners are still in business, and we look forward to partnering with them again in the upcoming concerts.”

Share price recovering

Those responsible for constructing and setting up the concert space are also reaping the rewards. Some prominent players known for creative and professional space planning and construction include the SGX-listed Kingsmen Creatives, Hong Kong-listed Pico Far East Holdings and previously-listed Cityneon Holdings.

Thanks to the reopening, Kingsmen’s share price has seemingly found a bottom. As at Sept 14, shares in Kingsmen have gained some 5.77% ytd to close at 27.5 cents. For 1HFY2022 ended June, Kingsmen saw losses narrowing by 9.4% y-o-y to $1.5 million, while revenue gained 4.5% to $122.4 million.

The revenue growth was due to higher contributions from most of the group’s business segments, except its research and design division.

As stated in the group’s earnings report, the return of physical shows and the resumption of projects that were put on hold supported the revenue increase.

The group also noted that there were still projects on hold and have yet to resume.

Kingsmen is primarily in the business of constructing exhibitions, museums and attractions. Some notable works include the annual Formula One races, the F&B festival Chang Sensory Trails in 2017 in London, San Francisco and Singapore; and the Macallan Experience in 2020 at Raffles Hotel.

In an email interview with The Edge Singapore, Kingsmen’s CEO Andrew Cheng admits that the past two and a half years have been tough for Kingsmen and the industry at large.

But with restrictions being lifted, Cheng sees an improvement in business flows. “While we saw our first half continue to be impacted by various lockdowns, restrictions and disruptions on our business volume, our core business remains robust, and we are seeing many more projects confirmed and coming on stream,” says Cheng.

He remains cautious while enjoying this resumption in business. “We are not out of the woods but are encouraged to see a pick up in the volume of work and expect a strong second half performance as we drive forward in our recovery.”

Despite the lowered restrictions, Cheng is also mindful that global tourism flows have yet to fully recover to pre-pandemic levels, with China — one of Singapore’s most important tourism markets — still under strict lockdown due to its zero-Covid-19 policy.

Additionally, current global political and economic environments have also dampened travel sentiments. At the same time, emerging challenges such as rising inflation, interest rates and continued disruptions are expected to drag on the industry.

Cheng has noticed that the pandemic has changed the market needs and client expectations, as there is a greater emphasis on engagement and experiences. The group, he adds, is well-positioned to create and deliver what the market needs

Investing in entertainment

Following GHY’s 1HFY2022 results, DBS Group Research analyst Ling Lee Keng maintained her “hold” call on the stock with a lower target price of 43 cents from 45 cents.

Ling’s call extends DBS’s close watch on the company after she downgraded GHY from “buy” in March.

“For FY2023, we expect the resumption of concerts in China to be likely in 2H2023. We have assumed a total of nine concerts, out of which five would be in China,” Ling wrote on Aug 19.

Similarly, she maintained a “hold” call on mm2 Asia in a June 1 note, with a lower target price of 6 cents from 6.7 cents.

“Concrete plans to reduce gearing need to be in place,” adds Ling. “Net debt of $195 million with net gearing of 1.22x as at end FY2022 remains high, despite the recent capital-raising exercises that drummed up about $80 million. The high gearing level remains a key concern, as the previously proposed initiatives to pare down debt have lapsed.”

mm2 Asia faces roughly $153 million of debt, set to mature by the end of FY2023. In March, mm2 Asia placed 75 million new shares at 8 cents each.

The following month, mm2 Asia placed another tranche of 390 million new shares at 5 cents each, sold to prominent businessmen Sam Goi and Oei Hong Leong. Together, the two tranches raised $25.5 million.

Additionally, plans to sell its Cathay cinema business in Singapore fell through in January.

DBS has since suspended its coverage of mm2 Asia, though it expects “strong revenue recovery” within the next 12 to 18 months. “We believe that the group is on the recovery path, but without concrete plans to reduce gearing, a swift turnaround to profitability is unlikely,” said Ling.

Conversely, UOB Kay Hian Research analysts Llelleythan Tan and John Cheong were much more positive on mm2 Asia, maintaining “buy” in a June 10 note with an unchanged target price of 11.5 cents. “Our target price is based on a ‘sum of the parts valuation, with [mm2 Asia’s] core production business at 11.4x FY2023 EV/ ebitda, in line with larger peers; its cinema business at 8x, in line with larger peers; and UnUsUaL and Vividthree at market value,” they write. “We have also incorporated a 25% conglomerate discount to account for the uncertainty facing its debt restructuring and rolling over our valuation to FY2203.”

As for UnUsUaL, KGI Securities Research analyst Simeon Ang initiated coverage on June 20 with an “outperform” call and a target price of 19.2 cents. Ang expects UnUsUaL to return to profitability in FY2023 with a patmi of $5.2 million. “There are three key drivers of UnUsUaL Productions’ financials over the next four years, namely the number and scale of live events produced and promoted, average ticket prices and break-even costs.”

Given Live Nation’s double-digit y-o-y growth this year, Ang’s “conservative” forecast sets an average selling price of $160 for tickets with a four-year CAGR of 4.1%. However, RHB’s Jarick Seet has rated UnUsUaL as “neutral”, with a target price of 14 cents in a June 17 note. “We believe the worst is over for UnUsUaL, which was badly affected by Covid-19. We expect the company to return to profitability in FY2023 due to the concerts it has already announced and the potential pipeline of events ahead.”

With international travel intensifying, the return of music and live entertainment events will add to the experience of visitors and locals, reckons Yap Chin Siang, deputy chief executive at the Singapore Tourism Board (STB). He says this will “help us maintain international mindshare and reinforce our position as an attractive leisure destination.”

‘Robust’ gig list

These events will also boost spending in F&B, accommodation and retail, Yap tells The Edge Singapore.

Apart from the standalone concerts, he points to a “wide variety” of music festivals for the remainder of this year.

These include the Mandarin pop weekender One Love Asia Festival, organised by digital media group WebTVAsia, and HypeWorld, a new electronic music festival organised by Singaporean record label Hype Records. Both events are scheduled over the weekend on Oct 22 and 23.

The outdoor dance festival ZoukOut will return in December, ending a three-year hiatus. After 19 years, the organisers of the annual dance festival opted for a break in 2019, citing years of falling attendance. In 2014, ZoukOut welcomed a record 50,000 attendees, declining sequentially to some 20,000 in 2018. That year, ZoukOut ran a truncated, one-day event after six years of running it as a two-day festival.

Yap says STB works with event organisers to support high-quality events that can add diversity to Singapore’s tourism landscape. “Areas of support include financial schemes under the Tourism Development Fund and other non-financial assistance and facilitation to ensure their events run smoothly.”

As the city-state welcomes more visitors, he adds that a robust leisure events calendar is integral to STB’s strategy to market Singapore as a must-visit destination.

The show must go on, but could these experiences entice investors? Only time will tell