G.H.Y Culture & Media Holdings Co., Limited IPO: What you need to know

Entertainment and content provider, G.H.Y Culture & Media Holdings Co., Limited (“G.H.Y”) is gearing up for a listing on the Mainboard of Singapore Exchange and has lodged a Final Prospectus on 11th December 2020 with the Monetary Authority of Singapore.

In this article, we will be looking at some of the key highlights for this upcoming Mainboard IPO.

Details of Offering

G.H.Y will be offering around 21.7 million ordinary shares at S$0.66 which comprises of:

• 3 million ordinary shares by way of public offer

• Around 18.7 million ordinary shares by way of placement

Based on the placement price and enlarged post-IPO share capital of 1.07 billion shares, G.H.Y's market capitalisation will come in at around S$708.7 million.

The public offer opens at 9pm on 11 December and will close at 12noon on 16 December.

G.H.Y expects to commence trading on the Mainboard of Singapore Exchange on 18th December.

For more information on this IPO, please click here: https://bit.ly/GHY_Prospectus

Profile & Corporate Structure of G.H.Y

G.H.Y is an entertainment company that focuses on various business segment such as:

• Drama and Film Production

• Concert Production

• Talent Management

• Costume, Props, Make-Up Services

For the Drama and Film Production segment, G.H.Y has produced TV and web dramas and films in the PRC, Singapore and Malaysia which have been broadcasted and/or distributed on TV networks, such as CCTV, and video streaming platforms in the PRC, such as iQIYI and YOUKU.

For the Concert Production segment, G.H.Y involves in the organization and management of respective concerts in various jurisdictions, depending on the scope and extent of the rights for the concert production. GHY has co-operated with well-known international artistes such as Jay Chou and Li RongHao.

For the Talent Management Segment, G.H.Y identifies and recruit artistes who are based mostly in the PRC and have built up a stable pool of well-known artistes. As at the Latest Practicable Date, GHY manages close to 50 artistes and the current pool of artistes are actors and actresses who are primarily based, or whose projects and engagements are primarily based, in the PRC and/or Singapore.

For the Costume, Props, Make-Up Services segment, G.H.Y provides costumes, props and make-up services for artistes and third-party production companies in respect of their drama and film production activities by engaging subcontractors for the provision of such costumes, props and make-up services.

Positive Response & High Viewership Rating

Since 2018 till the Latest Practicable Date, the Group has already completed the production or co-production of six dramas and one film series. In particular, three of G.H.Y’s dramas, “Perfect Village 最美的鄉村”, “The Little Nyonya 小娘惹” and “The Frontliners 最美逆行者”, were broadcasted and distributed on CCTV and/or iQIYI and received positive reception and high viewership ratings.

According to Frost & Sullivan, “Perfect Village 最美的鄉村” ranked first in terms of viewership ratings among all TV series broadcasted on TV channels during the same time slot when it was aired. On the other hand, “The Little Nyonya 小娘惹” was ranked third in terms of viewership ratings among all TV series broadcasted on TV channels during the same time slot when it was aired for episodes 1 to 17, and first in terms of viewership ratings among all TV series broadcasted on TV channels during the same time slot when it was aired for episodes 18 to 45.

“The Frontliners 最美逆行者”, which was also broadcasted in the PRC in September 2020, ranked second for episodes 1 to 4, first for episodes 5 to 13 and third for episode 14, in terms of average viewership ratings among other TV series broadcasted during the same time slot.

Management Team

Mr. Guo Jingyu is the Executive Chairman and Group CEO of G.H.Y. He was appointed to G.H.Y’s Board on 29 May 2018. Mr. Guo is responsible for supervising the overall business operations and management of G.H.Y, as well as business strategies and providing executive leadership and supervision to the senior management team. He is also responsible for directing and producing the drama, film and online video series projects produced by the Group.

Popularly known as King of Legendary Drama, Mr. Guo has more than 25 years of experience as a producer, director and scriptwriter. Prior to joining the Group, Mr. Guo was a director, producer and scriptwriter with Perfect World, an entertainment company listed on the Shenzhen Stock Exchange which business includes TV program and film production, from March 2011 to December 2018.

Historical Financial Performance

G.H.Y’s revenue for 6M FY2020 stands at approximately S$37.2 million, a year-on-year decrease of 10.7%. The decline was mainly due to the different mix of revenue models under its TV program and film production business segment and the timing of recognition of revenue for each revenue model, which was offset by revenue recognized from the two concerts held during the financial period.

In 6M FY2019, there was only one drama which was developed for production by G.H.Y and licensed to customer for a fixed fee, and 100.0% of the revenue was recognized at the point in time upon delivery in 6M FY2019. The drama was of a larger scale of production, as compared to the four dramas and one film series which revenue was recognized in 6M FY2020. In 6M FY2020, revenue was recognized mainly for the four dramas, one film series and two concerts held in 6M FY2020.

Despite the decline in revenue, G.H.Y’s profit after tax for 6M FY2020 was at S$13.0 million, a year-on-year increase of 11.9%. The rise in profit after tax can be seen from a better gross profit achieved in the financial period despite being offset by a higher administrative and selling & distribution expenses.

Revenue by Business Segment

(1) G.H.Y has a short operating history beginning from 22 March 2018, hence resulting in the significant lower revenue

(2) With the Group’s concert production segment only commenced in the second half of FY2019 and hence, no revenue was recorded for the concert production business in 6M FY2019.

(3) The costumes, props and make-up services business only commenced in the second half of FY2019 and hence, no revenue was recorded for the costumes, props and make-up services business in FP2018 and 6M FY2019.

For 6M FY2019, most of the revenue came from its TV Program and Film Production segment while the remaining came from its Talent Management Services segment.

For 6M FY2020, majority of the revenue still derived from its TV Program and Film Production segment, but the weightage was reduced to only 58.9%. The next largest revenue contributor came from the Concert Production segment, with a weightage of 39.8%. The remaining revenue came from the Talent Management Services and Costume, Props and Make-Up Services segment.

Revenue by Geographical Segmentation

In terms of the Geography breakdown, majority of G.H.Y’s revenue for 6M FY2019 came from the PRC while a minimal amount of revenue was derived from Singapore. For 6M FY2020, the percentage has changed significantly, with Singapore contributing 78.5% of the total revenue while the remaining 21.5% came from the PRC.

This was mainly due to the two concert productions which were held in Singapore under the concert production business segment in 6M FY2020 and the ongoing filming and production of one drama under the TV program and film production business segment in 6M FY2020, for which the copyright and ancillary rights to this drama were sold to a customer located in Singapore.

Dividend Policy

G.H.Y does not have any fixed dividend policy. The declaration and payment of future dividends may be recommended by G.H.Y’s Board, which subjects to various factors such as level of the Group’s cash and retained earnings, actual and projected financial performance, expected future earnings, cash flow, working capital requirements, general business and financing conditions.

Currently, G.H.Y’s Board intends to recommend dividends of at least 30.0% of the Group’s net profit after tax generated in FY2020 and FY2021. Based on an Earning Per Share (“EPS”) of 1.43 Singapore cents in FY2019, G.H.Y’s dividend per share amounts to 0.43 Singapore cents based on a 30% dividend payout.

Cornerstone Investors

For this upcoming IPO, several parties have committed to invest in G.H.Y as cornerstone investors. They are as follow:

• Epical Entertainment

• Hong Kong Chixin Investment

• Consultancy company, ICH Capital

• Entertainment service provider, iQIYI International Singapore

• King Kong Media Production

• Osim International founder, Ron Sim

• Songful Global Investment

• Qilin Asset Management

• Brand developer, V3 Brands

• Investment holding company, Yinson Capital.

Use of IPO Proceeds

G.H.Y intends to utilize the net proceeds from the upcoming IPO towards the following purposes:

• Expansion of TV program and film production business via investment in production, acquisitions, joint ventures and/or strategic alliances.

• Expansion of concert production business via investment in production, acquisitions, joint ventures and/or strategic alliances; and

• General corporate and working capital purposes.

Growth Prospects

In the long run, G.H.Y intends to expand their regional reach and strengthen the Group’s presence in the Asia-Pacific region, particularly in Southeast Asia, by expanding foothold in Singapore.

G.H.Y’s directors believe that gaining access to wider audiences in Singapore and Malaysia will provide the Group with exposure in new markets and further opportunities for growth for both their TV program and film production and concert production businesses.

G.H.Y also intends to leverage on the connectivity of the PRC, Singapore and Malaysia, as well as the ASEAN region, to showcase its abilities and to achieve international reach and expansion.

Industry Trends

According to an independent report by Frost & Sullivan, the market size of drama series in China for 2019 amounts to RMB 99.1 billion, has grown by a Compound Annual Growth Rate (“CAGR”) of 4.5% between 2015 and 2019.

With the increase in internet penetration, unlimited geography coverage of internet, and diversification of broadcasting channels, audiences have the freedom to engage a variety of drama series content in their spare time.
Furthermore, the fast-growing online video platform continues to drive demand for contents. Together with TV channels, the market size of China drama series market is expected to reach over RMB 100 billion within the next 5 years.

As such, the market size of drama series is forecasted to reach approximately RMB121.3 billion in 2024, attaining an estimated CAGR of approximately 4.1% between 2019 and 2024.

Risk Factors for G.H.Y

While we see potential in the upcoming growth of G.H.Y, we also noted some risks that they might face:

• Dependent on third party TV networks and video streaming platforms

• Dramas and films produced are subject to laws and regulations relating to distribution and censorship

• TV program and film production may be adversely affected by delays and cost overruns

• Dependent on relationships with key agents, managers and artistes for the concert production business and talent management services business

Conclusion

On summary, below are some competitive advantages that G.H.Y has to offer:

• Securing a buyer for the film/series before production – reduces commercial risk for G.H.Y significantly.

• End to End Production Capability (Idea Development to Post Production) – reduces the risk of cost-overrun and delay in production schedule.

• Secure long-term rights to Jay Chou’s concert across 6 countries– which has a record of sold-out concerts in many countries.

• Successful past productions and ability to produce high quality and well-received drama and films through established in-house scriptwriters

Coupled with the long list of cornerstone investors, positive industry trends and the management’s plan for the future, G.H.Y is positioned for a long runway of growth upon its listing.

DBS, UOB Kay Hian and Bank of China, Singapore are the joint underwriters and book runners for this upcoming IPO.

For more information on this IPO, please click here: https://bit.ly/GHY_Prospectus