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Unusually quiet for UnUsUal, but party might get started at year’s end: KGI Securities

Lim Hui Jie
Lim Hui Jie • 4 min read
Unusually quiet for UnUsUal, but party might get started at year’s end: KGI Securities
UnUsUal sees a quiet first half to 2020 as concerts were cancelled, but KGI Securities is optimistic that concerts will resume by year-end.
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KGI Securities has remained optimistic on entertainment provider UnUsUal (UNU) even as concerts in Singapore were stopped for the first half of 2020, and expects concerts to resume by the year’s end.

For FY2020, UNU recorded a profit of $6.3 million for the financial year ended March 31, down 52 per cent from a year ago.

See: UnUsUaL FY20 earnings fall 52.3% to $6.3 mil on postponed concerts and events due to Covid-19

Unusual did not release its quarterly financial statements following amendments to the SGX Catalist rules. The company will forgo reporting its 1Q21 results, with its next announcement, 1H21, due November 14.

See: UnUsUaL Limited to skip quarterly reports following amendment to Catalist rules

In an unrated report dated August 20, analysts Joel Ng and Amirah Yusoff warn that the company may see losses in 1H21, with only two concerts run in Taipei as of August 2020.

Furthermore, although those shows were sold out, UNU could only secure a 30% cut, as they were unable to be there physically and had to outsource the management and production of the shows, due to travel restrictions.

Besides those, UNU has been unable to run any shows at all since February 2020. However, Taipei has recently reopened, and management is of the view that Singapore, Malaysia, China and Hong Kong should also begin to reopen by the end of CY 2020 (or UNU’s 3Q21).

They note online live-streaming of live concerts could become a new source of income to help make up for cut physical capacity in concert halls/venues, especially as Covid-19 remains an unavoidable threat to UNU’s core business in the near future.

For now, UNU is making every effort to reduce operating costs, and have managed to do so by about 30% and still retain its core competencies.

Looking forward, UNU is hoping to restart shows when restrictions ease to allow at least 50% capacity of concert halls/stadiums – possibly by the end of CY 2020 in Singapore, China, Hong Kong and Malaysia, depending on the Covid-19 situation and safety measures in place.

However, since running shows at minimal or 50% capacity would be insufficient for any stakeholder to turn a profit, artists would likely have to do multiple shows to make up for cut capacity.

The company’s management also revealed it is looking at pushing for paid live-streaming of its concerts online, in a similar tune to South Korea’s BTS’s live concert ‘Bang Bang Con’.

Ng and Yusoff said this could be a “win-win” situation for all. Online concert tickets cost 20% of a regular ticket, and do not have limits on the number of viewers or restricted by viewers’ locations.

BTS’s Bang Bang Con drew more than 750,000 concurrent viewers at its peak, and over 50 million fans just in a weekend, with each viewer having paid about $35 per stream – bringing in an estimated total of $26 million.

In affection, UNU’s management is of the view that online live-streaming of concerts could become a new normal for fans worldwide, especially if safety distancing measures continue to be imposed and the number of physical participants continues to be restricted throughout the next year.

Even post Covid-19, live-streaming of concerts could continue to be an additional revenue source as it allows fans from all over the globe to tune in to live concerts without the costs and hassle for travel, just as how live sports events and tournaments have been live-streamed for many years now

The analysts also note that UNU is in a strong position to ride out the crisis. As at end March, UNU reported that it had $12.6 million in cash, which would be able to last the company another three years.

All other expenses such as manpower, subcontractor, transportation, and freight costs (totalling some $7.3 million) are highly dependent on whether it can organise such large-scale events. As such, these will not be a drag on its cash flows in FY21.

“A best-case scenario that may possibly work out is if UNU can start organising Singapore concerts by the Oct-Dec 2020 period, as there could be high demand following the concert drought from Feb to Sep 2020,” say Ng and Yusoff.

“Assuming a 50% capacity limit due to safe distancing measures, UNU could possibly still mint a profit if all stakeholders (contractors, transport companies, venue owners) work together to bring costs down such that the breakeven levels are lower than what it was pre-Covid,” they add.

Looking ahead, the analysts’ only foreseeable risk to the stock is during when the company is unable to begin its live shows and concerts in 2021.

As at 3.29pm, shares of UNU are trading at 13.5 cents, with an FY20 book value of 2.4.

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