Company Update: 20 June 2022
Without song or dance, what are we?
- On the edge of glory. After two years of forced hibernation, UnUsUaL (UNU), a live entertainment producer and promoter, is on the cusp of a recovery from both a demand and supply perspective. Pre-pandemic, UNU produced and promoted more than 20 shows across over 10 cities annually. We see scope for UNU to return to such levels in the near-term and advocate investors to build long positions in this unnoticed recovery trade.
- Return to profitability. We expect UNU to return to the black in FY23F with revenue/PATMI of SGD45.6m/SGD5.2m, a stunning turnaround from FY22A’s SGD3.6m/-SGD4.2m. Subsequently, we pencil in 4-year revenue/PATMI CAGRs of 28.1%/54.5% on reattainment of pre-pandemic margins.
- We initiate with an Outperform recommendation and a blended peer and DCF-backed TP of SGD0.192 apiece.
After lagging the West, Asia is now ripe for demand boon.
Pollstar notes that globally, 1Q22 ticket sales have recovered to USD1.09bn from 1Q21’s USD30m. Nonetheless, there is USD0.9-1.3bn gap from pre-pandemic levels, which is presumably left for Asia to fill as the region has only recently started to lift pandemic curbs. Data from Google tallies with our prognostication as UNU’s key primary markets start to see marked action both on search trends and mobility.
Artistes are also revving up tours.
On the supply side of the equation, artistes are also stepping up their plans for tours across cities to reach out to their fanbase and remain relevant. In terms of pipeline, UNU has already announced a bevy of tours in home market, Singapore. Based on announcements as well as UNU’s track record, we believe that UNU has essentially secured 27.3% of our FY23F ticket sales forecasts. This gives us confidence that as more markets open, UNU would be able to potentially better our conservative numbers.
Valuation & Action
We initiate with an Outperform recommendation and a TP of SGD0.192/share. Conservatively, we ascribe c.15% discount to the midpoint of our valuation range to factor in execution risks. Our range is derived from FY+1/+2 peer P/E valuations as well as base/bear discounted cashflows. Our DCFs considered WACC of 8.3%-8.7% and terminal growth rate of 1.8%-2.2%. We believe that UNU is the best-in-class play in SGX when it comes to live entertainment and that the implied FY24F 18.4x P/E is inexpensive and premised on recovering fundamentals as well as track record in bringing in artistes with wide and established fanbase.
The biggest risks to UNU performance are the reimposition of pandemic curbs, and cancellation of shows. Other risks include weaker-than-expected discretionary spend, potential oversupply of live entertainment events that may sap out fan demand, cannibalisation of fan demand by online streaming, and shareholder dilution from potential equity fundraising.