SINGAPORE (Jan 9): RHB is certain that profits from Master, the latest South Korean crime-action blockbuster to hit the silver screens, will be yielding Spackman Entertainment Group “superb” 1Q17F earnings.

(See also: Spackman breaks even with movie Master)

Master is produced by Spackman’s production unit Zip Cinema Co, and is said to have been the most-watched movie in South Korea during the Christmas weekend of 2016 with some 2.2 million viewers.

While RHB analyst Jarick Seet notes that FY16F will still be a loss-making year for Spackman due to operating costs from its disposal of Opus Pictures, he stresses that the profits from Master, including ancillary income, will only be recorded in 1Q17F – hence causing a “spike” during the quarter itself.

“This is mainly because Spackman is not the presenter nor distributor of the movie, and would only be able to get a share of the consolidated earnings from the movie after screening ends”, he explains in a Monday report.

Seet anticipates the number of movies produced by Zip Cinema to increase going forward.

Indeed, Zip Cinema has already slated its next production for release in 2H17: Golden Slumber is a remake of the 2010 Japanese thriller of the same name based on the novel by Isaka Kotaro, and will star South Korean A-listers such as Kang Dong Won and Han Hyo Joo.

“With [Zip Cinema’s] proven track record, we expect the movie to be profitable and expect a conservative base case of 4 million ticket admissions, which would likely yield profits of US$2.6 million for Spackman,” says Seet.

RHB is hence maintaining its “buy” recommendation on Spackman with an unchanged target price of 32 cents.  

“We believe that FY17F would be the inflection point for SEG back into strong profitability, driven by earnings from Master which is already yielding operating profits of US$4 million based on current admissions. This is coupled with the release of Golden Slumber and other movies slated for FY17F as well as the disposal of Opus Pictures in 2016,” concludes the analyst.

As at 10.58am, shares of Spackman are trading 0.5% lower at 18.6 cents.