Initiating Coverage Singapore 17 September 2019 Consumer Discretionary | Media & Entertainment UnUsUaL (UNU SP) Buy Shares On Sale Now! While Stocks Last!; BUY Target Price (Return) SGD0.42 (+50%) Price: SGD(+18%)0.28 Market Cap: USD206m 0.09m/0.06m Avg Daily Turnover (SGD/USD) Initiate with a BUY with SGD0.42 TP, 50% upside. UnUsUaL is an Asian Analysts concert promotion and event production leader. It has grown since listing into an entity with FY19 earnings of SGD13.2m (CAGR: +53%). Given more Jarick Seet entertainment opportunities ahead, this should help grow a conservative +65 6232 3891 FY20F-22F NPAT CAGR of 20%. Its share price has also corrected [email protected] significantly to a reasonable valuation. Consequently, we initiate coverage on a rare local firm that can still deliver high growth over the next 2-3 years. Lee Cai Ling Scalable and resilient business model – branching globally. UnUsUaL +65 6232 3892 has a scalable business model. It can leverage on strong relationships with [email protected] various artistes, and is able to host concerts in various venues globally, especially China. Top artistes can easily tour 40-60 cities in 1-2 years, and Share Performance (%) UnUsUaL has tested and proven the success of this concept, having brought YTD 1m 3m 6m 12m Chinese singer GEM to San Francisco for sold-out concerts in March and Absolute (20.5) (4.9) (3.3) (1.7) (34.1) Singaporean artiste JJ Lin for sold-out shows in Sydney and Melbourne. Relative (23.0) 1.4 (0.9) 1.6 (31.1) Expansion into family entertainment shows. UnUsUaL has partnered with 52-wk Price low/high (SGD) 0.25 - 0.43 Sliding Door Entertainment to bring the Walking With Dinosaurs (WWD) arena spectacular on tour to 11 cities in Asia for a total of 117 shows. The group is also presenting Disney On Ice (DOI) in South Korea and Taiwan with Feld Entertainment Inc this year. It has also developed and produced Apollo 11 – The Immersive Live Show with Nick Grace Management Ltd. Strong quarters ahead – robust pipeline of shows. Despite a weak 1Q20, the company is likely to enjoy a strong 2Q20F, and an even stronger 3Q20F due to the pipeline ahead. 2Q20F should see recognition of their family entertainment shows like DOI, WWD and Apollo 11 (partially). It should also recognise revenue from the fully sold-out indoor stadium concerts of a 4-night Andy Lau concert, as well as Westlife, and Gfriend concerts, aside from the Kang Daniel’s fan meeting. 3Q20F should see revenue from two nights of JJ Lin at a much larger national stadium venue – four times the capacity of his Source: Bloomberg 2018 concert, which has already been fully sold-out – and a full quarter recognition of Apollo 11. UnUsUaL also has upcoming concerts for JJ Lin in Macau/Hong Kong, Malaysia/Taiwan, and Australia, of which the company plans to add more shows in Sydney and Melbourne. Management is also in the midst of adding on concerts for other artistes, which should further boost its pipeline. Looking into potential M&A for further synergies regionally. The group is looking to acquire similar businesses in Malaysia and Taiwan ie similar firms with good track record, profitable, and accretive to it immediately. UnUsUaL is also trading at a much lower multiple when compared to larger global peers, which makes it an attractive target. Forecasts and Valuation Mar-18 Mar-19 Mar-20F Mar-21F Mar-22F Total turnover (SGDm) 46.4 56.9 77.3 81.2 99.7 Recurring net profit (SGDm) 10.0 13.2 17.0 21.2 24.5 Recurring net profit growth 36.6 31.7 28.7 25.0 15.5 Recurring(%) P/E (x) 28.2 21.5 16.7 13.3 11.5 P/BV (x) 7.1 5.3 4.0 3.1 2.4 P/CF (x) (181.4) (64.0) 12.0 9.7 8.6 Dividend Yield (%) - - - - - EV/EBITDA (x) 19.6 15.8 11.7 8.7 6.9 ROE (%) 25.2 24.9 24.3 23.3 21.2 Net debt to equity (%) (46.1) 0.5 (6.6) (27.2) (41.7) Interest coverage (x) 2034.2 1035.4 28.8 105.2 121.4 Source: Company data, RHB See important disclosures at the end of this report 1 UnUsUaL Limited Singapore Initiating Coverage 17 September 2019 Consumer Discretionary | Media & Entertainment Financial Exhibits Asia Financial summary Mar-18 Mar-19 Mar-20F Mar-21F Mar-22F Singapore Core EPS (SGD) 0.01 0.01 0.02 0.02 0.02 Consumer Discretionary Media & Entertainment EPS (SGD) 0.01 0.01 0.02 0.02 0.02 DPS (SGD) 0.00 0.00 0.00 0.00 0.00 Major shareholders (%) BVPS (SGD) 0.04 0.05 0.07 0.09 0.11 UnUsUaL Management 76.9 ROE (%) 25.2 24.9 24.3 23.3 21.2 Chin Soon Ong 2.1 ROA (%) 19.6 14.7 16.7 18.4 17.0 Chin Leong Ong 0.1 Valuation metrics Mar-18 Mar-19 Mar-20F Mar-21F Mar-22F Valuation basis Core P/E (x) 28.2 21.5 16.7 13.3 11.5 Our DCF assumption includes: i. WACC of 7%; P/B (x) 7.1 5.3 4.0 3.1 2.4 ii. Terminal growth of 1%. Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 EV/EBITDA (x) 19.6 15.8 11.7 8.7 6.9 Key drivers Our FY20 forecasts are most sensitive to changes in: i. The number and size of concerts held; Income statement (SGDm) Mar-18 Mar-19 Mar-20F Mar-21F Mar-22F ii. NIM; Total turnover 46 57 77 81 100 iii. Finance costs. Gross profit 18 23 26 28 34 Key risks EBITDA 14 18 24 30 34 i. Cancellation/postponement of events; Operating profit 12 16 21 25 29 ii. Accidents/mishaps during the event; Net interest 0 0 -1 0 0 iii. Responsible for third-party’s non-performances; Exceptional items 0 1 2 3 4 iv. The departure of key employees; v. Poor ticket sales. Pre-tax profit 12 16 20 25 29 Taxation -2 -3 -3 -4 -4 Company Profile Net profit 10 13 17 21 25 Established in 1997, UnUsUaL is one of the leaders in Core net profit 10 13 17 21 25 concert promotions and events production in Asia. The group predominantly operates through two business segments – production and promotion. It specialises in Cash flow (SGDm) Mar-18 Mar-19 Mar-20F Mar-21F Mar-22F producing and promoting large-scale live events and Cash flow from operations -3 -6 20 25 28 concerts in Singapore and the region. Capex -4 -2 -15 -5 -5 Cash flow from investing activities -7 -12 -15 -5 -5 Cash flow from financing activities 17 4 8 -8 0 Cash at beginning of period 10 18 4 17 29 Net change in cash 8 -15 13 12 23 Ending balance cash 18 4 17 29 52 Balance sheet (SGDm) Mar-18 Mar-19 Mar-20F Mar-21F Mar-22F Total cash and equivalents 18 4 17 29 52 Tangible fixed assets 10 10 22 23 23 Intangible assets 3 2 2 2 2 Total investments 0 1 2 3 4 Total other assets 21 74 61 62 67 Total assets 51 90 102 116 144 Short-term debt 0 4 12 4 4 Total long-term debt 0 0 0 0 0 Total liabilities 12 37 32 24 29 Shareholders' equity 40 53 70 91 116 Minority interests 0 0 0 0 0 Total equity 40 53 70 91 116 Total liabilities & equity 51 90 102 116 144 Key metrics Mar-18 Mar-19 Mar-20F Mar-21F Mar-22F Revenue growth (%) 37.1 22.6 35.8 5.1 22.8 Core net profit growth (%) 36.6 31.7 28.7 25.0 15.5 Core EPS growth (%) -17.6 30.8 28.7 25.0 15.5 Gross margin (%) 38.5 40.3 34.1 34.6 33.9 Core net profit margin (%) 21.6 23.2 22.0 26.1 24.6 Dividend payout ratio (%) 0.0 0.0 0.0 0.0 0.0 Source: Company data, RHB See important disclosures at the end of this report 2 UnUsUaL Limited Singapore Initiating Coverage 17 September 2019 Consumer Discretionary | Media & Entertainment Investment Merits Rare local company with strong earnings growth – FY20F-22F CAGR of 20%. UnUsUaL is one of the rare companies in Singapore that has consistently delivered strong earnings growth, and is likely to continue to delivering strong earnings growth going forward – this is backed by the group’s strong pipeline. Since its 2017 listing, UnUsUaL has grown into a company with a net profit of SGD13.2m as at FY19 from SGD5.6m (12 months pro-rated) – this represents a CAGR of 53%. Going forward, with more family entertainment shows in the pipeline, as well as larger-sized concerts and partnerships with artistes in new foreign venues, this should help to further grow a conservative FY20F-22F NPAT CAGR of 20%, in our view. Figure 1: Revenue – FY18-22F (SGDm) 120.0 100.0 CAGR 21% 80.0 60.0 99.7 40.0 77.3 81.2 56.9 46.4 20.0 0.0 FY18 FY19 FY20F FY21F FY22F Source: Company data, RHB Figure 2: Net profit – FY18-22F (SGDm) 30.0 25.0 20.0 CAGR 25% 15.0 24.5 10.0 21.2 17.0 13.2 5.0 10.0 0.0 FY18 FY19 FY20F FY21F FY22F Source: Company data, RHB Easy, scalable, and proven business model.