Team Name: BIC Capital 11/08/19 UnUsUaL Limited (SGX:1D1): Price Target $0.38 Team No: 141 Team Leader: Yong Yao Zhen Kevin
Market Cap (mm)/ Price: $288.2 / $0.28 Q1 Rev Projection: S$20.67 million 52 Wk Low / High: $0.26 / $0.46 Q1 EPS Projection: S$0.041 Beta / Yield: 0.79 / 0% FY2019 Rev Projection: S$82.67 million FY2019 EPS Projection: S$0.08
Fundamentals Competition/Distribution/Production: ➢Live Nation Drivers / Catalysts: ➢HIM International Music ➢FNC Entertainment ➢Growing spending power and willingness to spend on live ➢B’in Live Co entertainment events in Singapore ➢Growing live entertainment market in China with untapped potential coupled with the acquisition of Beijing Wish opening doors for expansion in China by UnUsUaL Industry overview and comparison: ➢Expansion into Family Entertainment as a new revenue ➢A total of 55% of the market was represented by live source music ticket sales and sponsorship Management: ➢Within the $20bn live music market, concert ticket ➢CEO: Leslie Ong Chin Soon revenues captures majority of the market share at 83% ➢ Responsible for overall management operations, ➢Major competitors of UnUsUaL are Live Nation and strategic planning and business development of the AEG Presents Group Recent Corporate Announcements of Interest: ➢CFO: Tay Joo Heng ➢Mr Leslie Ong acquired 20,408,164 shares (1.98%) of ➢More than 20 years of financial and operational ordinary voting shares via a married deal on 05-Mar-2019 experience in media, content production, technology ➢Directors announced on 29-May-2019 that UnUsUaL and trading industries Entertainment Pte Ltd had entered into definitive agreements relating to the Apollo Project, including an agreement to enter into a secured loan facility of USD 8,500,000 with UOB Financials: Risks: ➢Last Q Recap: Rev + 50%. EPS + 20%. ➢Regulatory risk ➢This Q Expectation: Rev + 242%. EPS + 60%. ➢Subject to the varying laws and regulations from the countries they promote and produce in ➢Artiste risk ➢Popular artistes unwilling to look to UnUsUaL to promote or produce their concerts ➢Macroeconomic risk ➢Revenues will be affected during recessions or periods when consumer spending power decreases due to the Bottom Line: Undervalued stock with potential incoming discretionary nature of UnUsUaL’s offerings revenue streams on top of strong fundamentals
This Year P/E: 1D1=28.5 vs STI=15x The Year EPS Growth: 1D1=30% vs STI=12% Valuation Next Year P/E : 1D1=29.5 vs STI=14x Next Year EPS Growth: 1D1=28.5% vs STI=12% Comps: Live Nation, HIM International Music, FNC Entertainment, B’in Live Co Valuation Methodology/Thesis: ➢Unchallenged in Singapore: project a 1.5% YoY growth for the Singapore market, in line with Singapore’s GDP growth forecast ➢Unleashing Potential in China: Forecasted 10% CAGR in for next 5 years, 100% increase in take from show, with 10% management fee ➢Unexplored Revenue Streams: Extrapolate from seat take-up rate for all three Family Entertainment shows Bottom Line: Strong EBITDA margins which are unmatched by other competitors in the market with strong year-on-year sales/EBITDA growth and high projected gross margins. Summary of Key Points
• UnUsUaL Limited operates in the live entertainment industry with specialization in the production and promotion of live events across Asia and internationally • Strong tailwinds within the live music industry; Concert revenues capturing 83% of the $200bn market. • Major competitors in Asia include Live Nation, Focus Entertainment and AEG Presents • Only company doing both promotion and production in Singapore – UnUsUaL holds a dominant position in the region and is poised to take advantage of the increasing willingness to spend on live events • Capturing value from the growing Chinese market through its acquisition of Beijing Wish • Expansion into the Family Entertainment space forms a new vertical for growth • Exposure to the North American market creates potential for a significant growth driver for the business • UnUsUaL is projected to continue healthy profitability and improved margins over the coming years • BIC Capital has come to a target price of S$0.38 (+36%). However, investors must keep in mind key risks such as Regulatory, Artistes and Macroeconomic risks.
Business Description
Founded in 1997, UnUsUaL Limited operates in the entertainment industry and specializes in production and promotion of large-scale live events and concerts in Singapore, Malaysia, Hong Kong, Taiwan, China and internationally. The company operates through three segments: Promotion, Production, and Others.
Production UnUsUaL manages the creative and technical aspects of the entire event including conceptualization, set design and creation, renting and installation of sound, light, and video equipment and providing other technical and creative solutions.
Promotion The company looks after the planning and managing of events and concerts. This includes venue and date selection, coordinating ticket matters and the marketing and promotion for the event/concert. The revenue is in the form of admission fees and sponsorships. This segment works closely with SISTIC in Singapore to execute ticket sales.
Others The company also manages the MAX-Pavilion at the Singapore Expo, where it collaborates with Sing-Ex Ventures with the rental of exhibition/concert halls and related equipment and co-management of exhibition/concert.
Revenue Analysis Figure 2: Revenue by Geography Figure 1: Revenue by Segment (FY18) 60,000 1,062 Others 883 China 15% 50,000 44,162 3% 40,000 2,148 27,900 30,000 Taiwan 20,063 3% 20,000 Singapore 49% 10,000 17,659 Hong Kong
SGD Thousands SGD 11,672 11,708 - 16% FY2016 FY2017 FY2018 Malaysia Production Promotion Others 14% Source: Annual Report Source: Annual Report
UnUsUaL’s total revenue witnessed a Y-o-Y increase of 22.6% in FY2018 (Figure 1), with a CAGR of 18.9% from FY2016 to FY2018. This is on the back of a 32% rise in net profit from FY2017 to FY2018. Majority of UnUsUaL’s revenue comes from Singapore (49%) due to its dominant presence and position in the country (Figure 2). This is followed by Hong Kong (16%), Others (15%), Malaysia (14%), China (3%) and Taiwan (3%). Business Description
SWOT Analysis
Strengths Weaknesses
▪ Dominant presence in Singapore’s Mandopop ▪ Lack of brand awareness amongst Western pop and Cantopop concerts segments artistes ▪ Vertical integration provides cost advantage ▪ Limited expertise and experience hosting ▪ Established track record in production and concerts in Mainland China promotion of shows and connections with various top artistes (e.g. Jay Chou, JJ Lin, Hacken Lee) ▪ Strong network of established partners which allows them access to popular IPs Opportunities Threats
▪ New revenue generators in UnUsUaL’s ▪ New technologies might disrupt and shift expansion into the Family Entertainment space consumer spending away from live entertainment ▪ Exposure to the North America live entertainment experiences scene creates a new geographical segment for ▪ UnUsUaL operates in the consumer discretionary growth sector, making it sensitive towards recession/fall ▪ Exposure to China’s live entertainment market in disposable income
Industry Overview and Competitive Positioning
The overall music industry is largely dominated by live music, with a total of 55% of the market represented by live music ticket sales and sponsorship (Figure 3). Within the $20bn live music market, concert ticket revenues captures majority of the market share at 83% (Figure 4), representing a significant market size which UnUsUaL is tapping into.
Figure 3: Music Industry Breakdown Figure 4: Live Music Industry Breakdown
Synchronization, 1% Performance Live Music Rights, 5% Ticket Sales, Concert Ticket 43% Revenue, 83% Physical, 10% Live Music Live Music Sponsorship, Streaming, Sponsorship, 18% 17% Music 12% Downloads, 10% Source: PwC Source: Live Nation Company Report
Live Music Industry The live music industry has also witnessed significant growth throughout the years. This is evident by looking at the performance of the top 100 worldwide music tours worldwide. Gross revenue from the top 100 worldwide music tours had witnessed a CAGR of 3.6% from 2011 to 2018 (Figure 5). The gross revenue from live music tour performances was largest in 2017, when it reached US$5.65 billion worldwide, but only reduced slightly in 2018, with the figure amounting to US$5.64 billion. The number of tickets sold for these worldwide tours had also shown a marked increase with 59.8 million tickets sold, having grown at a CAGR of 1.2% from 2011 to 2018 (Figure 6). Industry Overview and Competitive Positioning (Continued)
Figure 5: Worldwide Music Tour Gross Figure 6: Number of Music Tour Tickets Revenues in Billion USD Sold Worldwide in Millions 8 (2011-2018) (2011-2018) 7 6 5.7 5.6 80 5 4.9 66.8 4.7 63.3 59.8 60.5 59.8 5 4.2 4.2 4.1 60 54.2 51.3 51.7 4 3 40 2 20 1 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018 Source: Pollstar 2018 Year End Business Analysis Source: Pollstar
Competitive Landscape Figure 7: UnUsUaL’s Competitors UnUsUaL’s involvement in different geographical locations brings about several competitors within each region. Thus, BIC Capital has sourced out 18 direct competitors to UnUsUaL which are operating within promotion or production segments and which are largely focused on the Mandopop and Cantopop genres, a segment which UnUsUaL holds expertise in.
Major competitors within the industry includes Live Nation and AEG Presents which are both live entertainment companies focused on promotion and production of live music events. While these two competitors operates across all regions UnUsUaL is involved in, it is focused on promoting and producing concerts under the Western pop genre.
As shown in Figure 7, major competitors of UnUsUaL include companies which have worked with popular artistes which UnUsUaL has also previously worked with, for instance Hacken Lee and Jay Chou.
Porter’s Five Forces Supplier power is low in terms of equipment due to Figure 8: Porter’s Five Forces UnUsUaL’s large inventory of self-owned equipment while it is high in terms of Western pop artistes due to UnUsUaL’s competition within this genre. Thus, supplier power is averaged to be moderate. Buyer power is low as UnUsUaL operates in geographies with established markets where the consumers are willing and able to pay for concerts. Threat of substitutes is very low for UnUsUaL as it offers consumers live experiences which are irreplaceable. Threat of new entrants is low industry-wide due to the scale of the events hosted and high capital expenditure required to produce live entertainment shows. Lastly, industry rivalry is high as the live music market is highly fragmented with several competitors. Investment Thesis 1: Unchallenged in Singapore
Singaporeans are expected to spend more than US$47 million on live music events in 2020, growing at a 3.7% CAGR, from 2016 to 2020(1). UnUsUaL’s branding and strong track record puts them in a superior position over their competitors to capitalise on this supportive trend. Strong Track Record UnUsUaL holds a dominant foothold in the Mandopop and List of sold-out artistes promoted and produced Cantopop genre in Singapore, and have built a reputation for being by UnUsUaL performing in Singapore the preferred partner for concerts and events for several big-name artistes, such as Jacky Cheung, JJ Lin, and Hacken Lee to name a Air Supply, Andy Lau, Backstreet Boys, Cesar Millan, Chang Hui Mei, Foo Fighters, G.E.M, Hillsong, Jacky few. Many have chosen to work with UnUsUaL repeatedly. For Cheung, Jason Mraz, Jay Chou, JJ Lin, Kim Soo instance, Jacky Cheung initially engaged UnUsUaL solely for Hyun, Lee Min Ho, Lionel Richie, Mariah Carey, production services back in 2002, but has since returned to Michael Bublé, Park Bo Gum, Pet Shop Boys, S.H.E., engage UnUsUaL for both production and promotion services in Stefanie Sun, Rain, Wakin Chau, Wang Lee-hom, Yanni 2005, 2007, 2011 and 2018 for his Singapore tours. UnUsUaL’s dominance in Singapore can also be exemplified by how the company was engaged by the Singapore Government for many prominent national events such as Sing50 and the SEA Games. Sing50 was the first mega-concert to be held at the National Stadium with extensive planning and intricate execution which was only possible with UnUsUaL’s expertise and specialized equipment which includes lighting, cameras and trussing equipment, amongst others. UnUsUaL also received the silver award for the production of the SEA Games Carnival, which was further testament to their excellence.
Business Model Figure 9: UnUsUaL’s Value Chain(2)
Vertical Integration provides synergy and mitigates risks UnUsUaL is the only established group within the live entertainment industry in Singapore which is both a promoter and producer, with no major competitors in the sector that could match their profile(2). The company’s operations in both promotion and production segments create a vertically integrated business model, where it is able to provide comprehensive solutions and add greater value to its clients. This synergistic effect of being a producer and promoter has also allowed UnUsUaL to determine and identify costs which are relevant to the business, and work on lowering such costs without any significant impact to the company’s revenue. Furthermore, vertical integration is beneficial as it helps to mitigate the risks of operating in a single business segment through diversified revenue streams. For example, if there is an industry downturn in one of the business segments, UnUsUaL could shift its focus to capture value from the other instead.
Strong arsenal of long-lasting equipment providing cost effectiveness Table 1: UnUsUaL’s Inventory UnUsUaL boasts a strong arsenal of equipment which is essential to its production of live shows and concerts. Owning a total of 218 equipment UnUsUaL’s Equipment across light, sound and video, UnUsUaL is able to solely produce its events Inventory Useful Type and concerts without relying on third-party providers, allowing it to better Count Life manage costs and ensure cost effectiveness. Furthermore, the average useful life of each equipment is 5 to 10 years (Table 1), which will allow the Light 62 5-10 years company to produce several concerts across a longer period of time without incurring additional capital expenditure required for its equipment. Owning a large amount of inventory has also enabled UnUsUaL to diversify its Sound 142 5-10 years revenue streams, as seen from its ability to concurrently provide rentals of its equipment while operating under its main promotion and production Video 14 5-10 years segments. Source: UnUsUaL’s Website (1) PwC’s Global Entertainment and media outlook 2017 (2) UnUsUaL’s Prospectus Investment Thesis 2: Unleashing Potential in China
Figure 10: Music Industry Revenue in China (2011 to 2020) 1,500 986 1,064 809 898 1,000 650 726 476 501 529 584 500 162 174 187 200 215 231 248 266 285 304
Million USD Million 0 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020* Live music Recorded music Source: PwC, Informa Telecoms & Media, Ovum
The music business in China is a rapidly developing and vibrant industry, having gone from 12th to 7th in the International Federation of the Phonographic Industry (IFPI) global recording market rankings in just two years. According to the China entertainment and media outlook 2016-2020 published by PwC, there has been evident growth in China’s music industry, for both live music and recorded music. Live music is expected to grow at a CAGR of 6.5% from 2011 to 2020 in terms of revenue, while recorded music is expected to grow at a CAGR of 8.4% from 2011 to 2020 (Figure 10).
Growing presence of artistes promoting in China Figure 11: Number of Chinese Since recent years, the centre of Chinese pop has shifted to Cities Visited on Concert Tours China, with the Chinese market being the favoured destination 250 for many artistes to expand in and gain popularity. Growing 219 presence of artistes promoting and performing in China could be attributed to the increasing popularity of China's televised 200 reality singing competitions, such as "Sing! China" and "I Am Singer" that boasts hundreds of millions of viewers, and have 150 solidified their reputation as a viable source of opportunity and 88 success for Mandopop artistes such as G.E.M. Additionally, 100 72 top artistes who have frequently collaborated with UnUsUaL, such as Jacky Cheung, Jay Chou and JJ Lin, have been 50 28 touring in an increasing number of Chinese cities across the years (Figure 11), from a combined 28 Chinese cities toured 0 on their first tour to 219 Chinese cities toured on their fourth 1st Tour 2nd Tour 3rd Tour 4th Tour tour. This further exemplifies artistes’ intent to grow their influence in China, presenting great market potential that would Jacky Cheung Jay Chou JJ Lin benefit UnUsUaL’s expansion plans in China in the long run. Source: Musicacrossasia, Jackycheung.hk
Acquisition of Beijing Wish to drive growth Singapore’s entertainment scene is largely saturated given the fact that it is a small market. As such, UnUsUaL has begun exploring expansion opportunities in China, a larger market deemed to be a key driver for future growth in revenues. Despite current growth from China being relatively flat, it is expected to be materially larger going forward with the help of the acquisition of Beijing Wish, an event and content production company in China. UnUsUaL has previously worked with Wish as a local partner for China-held events and have recently acquired a 49% stake in the entity, which opens the door for UnUsUaL to expand at an exponential rate in China. In the past, UnUsUaL’s productions in China were managed jointly with Wish on a partnership model. However, this will change moving forward with Wish just taking on a management fee and UnUsUaL owning the shows entirely. As such, UnUsUaL will enjoy a larger take per show in the future and substantially increase its top-line for future shows completed in China.
Broadening the scope in China with Family Entertainment Furthermore, UnUsUaL also has plans to bring in more Intellectual Property (IP) Family Entertainment experiences to China. As per management, Family Entertainment is also still a nascent market in China. Since the scope for Western concerts are limited to the larger cities, UnUsUaL expects Family Entertainment shows to drive growth within China. With UnUsUaL’s branding, multi-country experience, and being based out of Singapore, it allows them to have an edge over its Chinese peers when negotiating contracts with global brands. Investment Thesis 2: Unleashing Potential in China (Continued)
Expansion into Tier 2 cities Table 2: Tier 2 Cities with Highest GDP Growth In the long run, management expects to see revenues Rank Metropolitan area Annual GDP growth from China overtaking Singapore. This would translate into substantial growth for the China business in the 1 Guiyang 10.2% next 2-3 years. UnUsUaL’s presence in China is also expected to double from 5 cities in 2018 to 10 in 2020, Urumqi 8.6% with management planning to enter into Tier 2 cities 2 which they feel are currently underpenetrated. Table 2 lists some of the possible Tier 2 cities that UnUsUaL 3 Nantong 8.6% could expand into. These cities had some of the highest GDP growth from 2017 to 2018, translating to 4 Nanchang 8.4% stronger purchasing power which will lead to higher expenditures on concerts and events. 5 Changzhou 8.4% Figure 12: Concert Capacity in Singapore vs China By increasing the number of cities they operate in, UnUsUaL will be able to offer a broader array of cities Concert Capacity of JJ Lin/Jacky to the artistes and producers, eventually helping them Cheung/Hacken Lee compared gain market share in Beijing and Shanghai. Moreover, China concerts boast a larger capacity at 3-4x that of Singapore (Figure 12). Given the number of cities and increasing affluence, the scope of growth in China is 8,000 18,000 also expected to be larger. However, according to management, despite the larger capacities in China, budget for production as well as the margins of the Singapore business are still largely comparable to that of Mercedes-Benz Stadium, Indoor Stadium Singapore. Shanghai
Investment Thesis 3: Unexplored Revenue Streams
In 2017, UnUsUaL expressed its intent to move into the Family Entertainment Events space. Since then, UnUsUaL has started working on projects such as Disney on Ice, Walking with Dinosaurs and Apollo11. Thus far, the company has completed the first half of performances for Disney on Ice in 2018, with the second half coming up in August 2019. Walking with Dinosaurs on the other hand will commence its tour in late August 2019. Finally, the company is also co-producing Apollo11, which will tour North America for 3 years starting from July 2019. To diversify its current earnings profile and form a new vertical within the Family Entertainment space, UnUsUaL intends to further its expansion within this space through the acquisition of new Intellectual Properties (IPs) and partnerships with IP holders.
Family Entertainment shows run at 7-8 times a week, with an average ticket price of $100 while concerts last for only 1-2 nights, with a higher average ticket price of $200. Nevertheless, the contribution to the bottom-line is similar on a per contract basis.
Disney on Ice UnUsUaL is collaborating with Feld Entertainment, a live show production company to jointly present “Disney on Ice” shows in Seoul. There will be 20 upcoming productions, which will be held in the Mokdong Ice Rink, with a maximum capacity of approximately 3,750. The tickets are split into 6 categories, ranging from 35,000 KRW to 180,000 KRW. The shows are subtitled in English, catering to a global audience. The productions proved to be very popular, with all dates being 100% sold out when the team viewed it on 31st July.
Walking with Dinosaurs UnUsUaL will be partnering with Sliding Doors Entertainment, a live entertainment promotion and production company, to launch the Asian tour of Walking with Dinosaurs. Shows will be starting in Malaysia from the 23rd of August 2019. The tour will comprise of 117 shows across a total of 11 cities. Countries and cities expected to be covered in the upcoming Asia Tour include Malaysia; Singapore; Hong Kong; Taipei; Seoul; Shanghai, Beijing, Wuhan, and Guangzhou in China; Manila and Jakarta. Investment thesis 3.1: Landing on North America with Apollo11
UnUsUaL Limited has partnered with Nick Grace Management (NGM) to produce an original play commemorating the Apollo Moon Landing in 1969. Apollo11 is an original play which tells the story of the moon landing from the perspective of the staff which worked on the Apollo Project. The first city tour began in Los Angeles on July 5th, 2019, with upcoming confirmed tours in California and Texas in 2H 2019. Each tour lasts around a month with approximately 36 shows per city. The Apollo11 production is expected to tour North America for 3 years, with further plans to tour Europe, Africa, Australia, Middle-East and South East Asia afterwards. Figure 13: Gross ticket sales of touring Figure 14: Attendance at touring shows shows in the United States in the United States (2010 to 2019) (2010 to 2019) 3000 25 18.5 1,633 20 17 2000 13.1 12.7 13.8 13.9 13.7 14 13.9 1,416 15 803 811 877 933 957 9811,007 1000 10 Millions 5
Million USD Million 0 0
Source: Broadway League Source: Broadway League
Apollo11 stands to benefit from a growing trend in the United States where there is an increase in consumer demand for plays. Based on a 2019 study done by the Broadway League, gross ticket sales of touring plays in the United States has doubled from 2010/11 to 2018/19, with a CAGR of 8.2% (Figure 13) as attendance at such shows has shown a marked increase of 5.4 million with a lower CAGR of 3.9% within the same period (Figure 14). This reflects a substantial increase in the consumers’ willingness and ability to pay for plays such as Apollo11 instead of ticket sales rising due to a higher population.
Table 3: All-time Viewership in the United States The production of Apollo11 marks the company’s first Viewership foray into the North American live entertainment Rank Event industry. The region presents a massive market for (millions) UnUsUaL, with gross ticket sales for touring plays of 1 Apollo 11 EVA 125–150 US$1.6 billion in the United States alone. The iconic 2 Super Bowl XLIX 114.4 Apollo Moon Landing was broadcast to over 650 3 Super Bowl XLVIII 112.2 million people globally, and remains the most watched 4 Super Bowl 50 111.9 broadcast in US’ television history till date (Table 3). 5 Super Bowl LI 111.3 Thus, with Apollo11, BIC Capital believes it will 6 Super Bowl XLVI 111.3 improve UnUsUaL’s brand recognition in North America, opening doors to further collaborations with 7 Super Bowl XLV 111 NGM as well as other North American production Source: NBC News companies on future projects. Table 4: List of IPs from UnUsUaL’s partners Collaborations into the future Partners Intellectual Properties possessed By working with the various new Family Entertainment Bounce - The Dancestreet Sensation NGM companies, UnUsUaL has also opened the doors for BATMAN LIVE –World Arena Tour future collaborations with these companies. NGM, Blue Man Group Feld Entertainment and Sliding Doors Entertainment Sliding Wicked are all reputable companies in the Family Doors Mister Maker Entertainment space with years of experience and a The Great Moscow Circus myriad of IPs (Table 4). These companies will also be able to leverage on UnUsUaL’s expertise in the Asia Disney Live! Marvel Universe Live! region, making it a win-win proposition. Feld Sesame Street Live! Jurassic World: Live Tour Source: NGM, Sliding Doors Entertainment, Feld Entertainment Financial Analysis
Relative Valuation Price EBITDA YoY Sales YoY EBITDA Market Cap Trading Comps Ticker (As at Margin Growth Growth P/E Ratio (S$MM) 8/8/2019) FY2018 FY2018 FY2018 UnUsUaL Limited Catalist: 1D1 0.28 288.2 31.4% 22.59% 34.22% 28.5 Live Nation Entertainment, Inc. NYSE: LYV 99.78 21,003.1 6.4% 11.97% 12.95% 163.7 HIM International Music Inc. GTSM: 8846 5.44 288.1 41.1% (11.67%) 43.56% 16.8 FNC ENTERTAINMENT Co., Ltd. KOSDAQ: 08173940 7.60 108.1 (5.1%) (42.22%) - NM Poly Culture Group Corporation Limited SEHK: 3636 1.28 315.5 15.3% (0.41%) (18.31%) 8.4 B'in Live Co., Ltd. TSEC: 6625 2.05 75.1 15.3% 38.92% 96.57% 18.3 High 99.78 21,003.1 41.1% 38.92% 96.57% 163.7 Low 1.28 75.1 (5.1%) (42.22%) (18.31%) 8.4 Mean 23.23 4,358.0 14.6% (0.68%) 33.69% 47.14 Median 5.44 288.1 15.3% (0.41%) 28.25% 18.3
FY2017 FY2018 2019F 2020F 2021F
Profitability Margins
50.0% 50.0% 40.0% 40.0% 30.0% 30.0% 20.0% 20.0% 10.0% 10.0% 0.0% 0.0% Return on Return on Return on Gross EBITDA Net Income Assets % Capital % Equity % Margin % Margin % Margin %
Healthy margins expected in the future Liquidity BIC Capital projects that UnUsUaL will have 4 continued healthy profitability over the coming years. Return on Assets % is expected to increase after a 3 short fall in FY2017 as UnUsUaL begins to utilize its assets on hand more efficiently. Margins are expected 2 dip slightly in the initial year as they venture into a new vertical in the Family Entertainment space, 1 before rebounding in subsequent years as they familiarize themselves in this new segment. Liquidity 0 is expected to remain stable over time as well, after a Current Ratio Quick Ratio short dip in FY2018 due to the 49% acquisition of Beijing Wish. P/E Band 55.0x PE Band shows huge room for price improvement 45.0x As of LTM 2019, we observe that UnUsUaL is trading 35.0x at below historical -1 SD of the P/E. This indicates 25.0x huge room for upward price adjustment. The stock is 15.0x underpriced despite good performance indicators from our financial analysis as seen above.. BIC Capital believes that the market is mispricing UnUsUaL due to general weakness in the market and being unconvinced that the Family Entertainment segment will not be a hit amongst consumers. PE Avg PE PE + 1SD PE - 1SD Valuation
Revenue and Net Profit Projections, FY2017 – 2023F 120 25 100 20 80 15 60 10 40 20 5 0 0 FY2017 FY2018 2019F 2020F 2021F 2022F 2023F
Singapore Concerts China Concerts Asia (ex. SG & CN) Concerts Family Entertainment Shows Net Profit
Assumptions Sensitivity Analysis Risk-free Rate: 1.74% 10 years SG treasury bond Cost Of Equity (Current STI price - Price of Market Returns: 6.89% STI when 1D1 IPO)/Price of 0.38 4.80% 5.30% 5.80% 6.30% 6.80% STI when 1D1 IPO*100 Interest Rate on 1.10% 0.46 0.40 0.35 0.31 0.27 0.00% No Borrowings Terminal Debt (COD): 1.30% 0.49 0.42 0.36 0.32 0.28 Market Returns – Risk-Free Growth Market Risk Premium: 5.15% Rate 1.50% 0.52 0.44 0.38 0.33 0.29 Rate Reversion to mean (consumer Adjusted Beta: 0.79 discretionary space) 1.70% 0.55 0.46 0.39 0.34 0.30 Cost of Equity 5.80% RFR+MRP*Beta (COE): 1.90% 0.58 0.48 0.41 0.35 0.31 Unchallenged in Singapore UnUsUaL is the clear leader of producing and promoting concerts in Singapore especially in the Mando and Cantopop genres. Having operated in Singapore for over 20 years, they have a strong foothold in the country. Given the small size of the country, we believe the market here is mature and UnUsUaL’s growth in the country is expected to be limited. Hence, we project a 1.5% YoY growth for the Singapore market, in line with Singapore’s GDP growth forecast. That said, UnUsUaL’s position in the market remains unchallenged and competitors are unlikely to be in the position to grapple market share away from UnUsUaL’s leading position.
Unleashing Potential in China With a strong track record of working with several big name Chinese artistes, along with their recent acquisition of a 49% stake in Beijing Wish, UnUsUaL is in prime position to capitalise on the growing trend of Mandopop artistes promoting in China. Taking into account UnUsUaL’s newfound ability to utilise Beijing Wish’s license to have full ownership of operations in China (compared to only being able to operate under a partnership model in the past), BIC Capital has forecasted China’s revenue to grow at a 10% CAGR over the next 5 years. Additionally, considering the fact that there will be a change in revenue sharing between UnUsUaL and Beijing Wish from a partnership model previously to one where UnUsUaL would now own the show, we also forecast an initial 100% increase in UnUsUaL’s take from concerts in China assuming a previously 50-50 split between the parties to one which is now 100% owned by UnUsUaL. We have also assumed a 10% management fee to be deducted from UnUsUaL’s take annually to be paid to Beijing Wish post-acquisition.
Unexplored Revenue Streams The company’s foray into the Family Entertainment space has allowed them to unlock a new revenue stream. Partnering with industry heavyweights such as Feld Entertainment, Sliding Doors Entertainment, and NGM on popular and recognised shows will also boost UnUsUaL’s reputation as a notable name in the Family Entertainment space. For projections, BIC Capital have used respective single-day shows across all 3 major events as proxies, determining the attendance rate and total expected revenue for each show through the number of occupied seats. These figures are further extrapolated with the help of management guidance on the number of shows to be held across the next few years. Investment Summary
Thus, BIC Capital believes that UnUsUaL Limited is ripe for steady growth for the next 5 years. With an ever- growing crowd of consumers willing to spend more on concerts in Asia, UnUsUaL is in an unique space to take advantage of this market. Its dominance in Singapore and expansion plans into China bodes well for the company as the company has very close ties with various high-profile Mando/Cantopop artistes who had engaged UnUsUaL for their promotion and/or production services. China particularly will be the hotspot for UnUsUaL with larger concert capacities and rapid GDP growth in tier-2 cities, which the company fully intend to take advantage of. Furthermore, BIC Capital sees UnUsUaL’s foray into the family entertainment segment a very promising one. Having secured several high-profile IPs such as Disney on Ice and Walking with Dinosaurs, the company will be able to open a new vertical into a new revenue stream and diversify their earnings. UnUsUaL’s partnership with NGM for Apollo11 also brings a new market for UnUsUaL to explore. North America is a gigantic market with large and rising gross ticket sales. This, coupled with the fact that the Apollo moon landing is iconic with an all- time viewership record, will no doubt bring customers in. These collaborations also brings more opportunities to collaborate with other IPs in the future. For example, Feld Entertainment owns several famous IPs, such as Disney Live! and Marvel Heroes Live!. If the partnership is mutually beneficial, future collaboration can not be ruled out. UnUsUaL also fare well against other entertainment companies. Although it is trading at a higher valuation, the valuation is justified by larger margins and greater YoY sales and EBITDA growth at almost 23% and 35% respectively. BIC Capital also projects the profitability to increase while margins remain steady, which will be a boon as the company expands its revenue. Furthermore, UnUsUaL is currently trading at near an all time low – BIC Capital believes the company to be undervalued with more room to growth. Risks associated with investment
1. Regulatory risk UnUsUaL is subject to the varying laws and regulations from the countries they promote and produce in. UnUsUaL would need to keep Figure 15: Risk Matrix in line with regulatory or legal changes so as to operate effectively.
UnUsUaL has an experienced management team which possesses years of experience in the industry. Additionally, for overseas events, they usually collaborate with local promotion companies which are familiar with the local regulatory landscape.
2. Artiste risk 3 2
UnUsUaL’s promotion business is dependent on securing artistes for Likelihood concerts. In the event where popular artistes is unwilling to use UnUsUaL to promote their tours, its’ revenue is likely to be impacted. 1 If shows or events organized are unpopular, UnUsUaL also faces the risk of making a loss or having to cancel the shows. Impact
UnUsUaL is highly reputable and have years of experience producing and promoting artistes in SEA, especially Singapore. With many artistes returning to UnUsUaL to promote their concerts, it is unlikely that its’ dominant position in Singapore will be affected. Additionally, 80-90% of UnUsUaL’s events are also insured from unforeseen events or cancellations.
3. Macroeconomic/Forex risk As live entertainment is discretionary in nature, a recession or reduction in spending power could heavily weigh on the attendances of UnUsUaL’s events as well as the revenue earned per concerts. Additionally, given UnUsUaL is now operating in several geographies, changes in forex rates might also cause potential dips in their revenues.
UnUsUaL has the ability to adjust and set prices of its events according to the economy so as to bolster its attendances. While margins could be suppressed, events’ attendances and revenues would remain resilient in the case of a recession. On top of that, the majority of UnUsUaL’s revenues are still from Singapore. Hence, forex rate changes might not affect UnUsUaL heavily.