GHY Culture & Media XJB -2.38% is eyeing a turnaround in FY2023 ended December, after its FY2022 results came in below DBS Group Research&rsquo s expectations.

 

GHY, on Feb 28, reported a net loss of $9.4 million for FY2022 ended December, on the back of a 45% decline in revenue to $45.7 million. For 2HFY2022, the group reported net loss of $8.0 million while revenue dropped 36% y-o-y, but up 22% h-o-h.

 

The overall net loss was mainly due to a foreign exchange loss of about $8.8 million arising from the appreciation of the Singapore dollar against the Chinese renminbi in FY2022, as the group has significant operations in mainland China.

 

In addition, GHY faced delays in signing contracts with some customers under the TV programme and film production business segment due to Covid-19 measures in mainland China that began in March 2022 and continued until November 2022.

 

While key terms may have been agreed upon in principle with customers, contract signing and production with some of the customers were delayed, which presented challenges in finalising these contracts.

 

For FY2022, the group recognised revenue mainly from three dramas, one online short-form drama series and two concert productions. Concerts account for 44% of the total revenue for FY2022.

 

GHY subsequently held a results briefing on March 14. Following the briefing, DBS analyst Ling Lee Keng slashed her FY2023/2024 earnings estimate by 70%-80%, with a lower number of projects, especially for the TV programme and film production segment.

 

In a March 15 note, Ling maintained &ldquo hold&rdquo on GHY with a slightly higher target price of 45 cents from 43 cents previously. The new target price represents a 7% upside against its last traded price of 42 cents.

 

&lsquo Healthy production pipeline&rsquo

 

Despite the net loss, GHY declared a dividend per share (DPS) of 0.10 cents.

 

Ling expects GHY to turn around this year, with the resumption of concert production, China&rsquo s reopening and the absence of the foreign exchange (forex) loss seen in FY2022.

 

Concert resumption and China reopening are positive developments, says Ling. &ldquo The resumption of concert production and the reopening of China would help boost the company&rsquo s overall performance going forward, though the challenging macroeconomic outlook could dampen discretionary spending.&rdquo

 

Ling also points to contract assets representing the group&rsquo s right to consideration for TV drama and film productions in progress. As at Dec 31, 2022, this stood at approximately $41.0 million.

 

Likewise, GHY&rsquo s concert production business has rebounded strongly, says Ling. &ldquo The group sold out tickets for Jay Chou&rsquo s concerts in Singapore and Malaysia in FY2022 and January 2023 respectively. Two more Jay Chou concerts are planned for Australia in March and Hong Kong in August 2023.&rdquo

 

Ticket sales for the concerts in Singapore were recognised in FY2022 while the Malaysia and Australia sales will be recognised in FY2023.

 

There are also plans to resume Jay Chou&rsquo s concerts in China, notes Ling, &ldquo as well as co-productions of concerts with other popular and well-known international artistes&rdquo .

 

Even with a healthy production pipeline, execution is still key, says Ling. &ldquo We project three or four dramas for FY2023/2024, compared to three in FY2022. The successful rollout of the productions in the pipeline would be the key to seeing an improvement in the group&rsquo s financial performance.&rdquo

 

From a net loss of $9.4 million in FY2022, Ling forecasts FY2023 net profit of $4.90 million, which could nearly double to $9.13 million in FY2024.