Entertainment Business Observation
Text/Duckweed
Just as Entertainment had expected, Lehua Entertainment finally chose to go to Hong Kong for an IPO.
Just recently, Lehua Entertainment submitted a listing application to the Hong Kong Stock Exchange, officially taking a key step of independent listing, according to the Hong Kong stock registration system, it is likely that lehua Entertainment will be able to complete the listing process in less than half a year, impacting the first share of the idol economy.
As early as more than 3 years ago, Entertainment Business Observation had written an article on the IPO of Lehua Entertainment (for details, see "The Most Critical Moment of IPO, but also the Most Dangerous Moment of Lehua"), at that time, it was believed that Lehua Entertainment was delisted after listing on the New Third Board, sold as an A-share listed company failed, and the domestic capital market was unfriendly to film and television companies.
Although the time is 3 years late, Lehua Entertainment has taken the right step. According to the prospectus, Lehua Entertainment is in very good operating condition, and it can be said that it is the best among the film and television companies currently listed on the Hong Kong stock market.
For such a head company to go public, the market's mood is naturally excited, even Weibo hot search is also discussing this matter, but entertainment business observation is cautious about this, in the 2022 Hong Kong-funded environment, after the listing of Lehua is likely to suffer a break, or even the stock price waist cut.
The industry with nearly 3 billion revenue in 3 years is not good, but the idol economy is still strong
Since 2018, with the overall decline of the film and television industry, star artists have also been crying bitterly, and the remuneration has been slashed, or there is no notice, and the income has dropped sharply.
However, this situation is not reflected in Lehua Entertainment, and from the financial report data, such a head artist agency is living better and better every year.
According to the financial report, in 2019, 2020 and 2021, Lehua achieved revenue of 631.4 million yuan, 922 million yuan and 1.2904 billion yuan respectively, a total of nearly 3 billion yuan in three years, and the net profit in the same period was 119.3 million yuan, 291.9 million yuan and 335.3 million yuan, and a total of more than 700 million yuan in three years, which can beat most A-share film and television listed companies in a second.
Although the business has three businesses: artist management, music IP production and operation, and pan-entertainment business, only artist management is really making money.
According to the financial report, in 2019, 2020 and 2021, the artist management income reached 530 million yuan, 808 million yuan and 1.175 billion yuan respectively, accounting for 84.0%, 87.7% and 91.0% of the total revenue, respectively, and the cash cow business was appropriate.
It is worth mentioning that the gross profit margin of artist management is also higher than expected. In 2019, 2020 and 2021, it reached 45.8%, 52.5% and 46% respectively, and although it fluctuated every year, it remained stable at about 50%.
According to the prospectus, Lehua Entertainment currently has 58 signed artists and has established a talent reserve including 80 trainees. Artists can be signed for 5-11 years. Han Geng, who everyone is more concerned about, has signed a contract for 11 years; Wang Yibo has signed a contract for 10 years; Meng Meiqi has signed a contract for 8 years; and Fan Chengcheng has signed a contract for 5 years.
The above data is simply summarized that the film and television entertainment market is not good, but the idol economy is still very good, and Lehua Entertainment relies on the idol artists cultivated to make money all the way.
Han Geng held 2.47% of the shares, and Zhou Bichang and others withdrew from the star shareholder sequence
The success of Lehua Entertainment is inseparable from the help of Han Geng.
As a member of the idol top boy band Super Junior, Han Geng just signed a contract with Jia Lehua in 2010, becoming the backbone of Lehua's early days, and the 2014 financial report shows that more than 16.53 million yuan was paid to Han Geng Studio, accounting for 25.26% of the company's operating costs.
In 2019, 2020 and 2021, the fees paid to Han Geng's affiliates were 24.14 million yuan, 24.14 million yuan and 31.24 million yuan, respectively.
It is also based on the opportunity of Han Geng's high-quality idols, Lehua Entertainment can not only leverage more domestic artist resources, but also successfully bet on the opportunity for the outbreak of internal entertainment idols, sending entertainment stars such as Wang Yibo, Fan Chengcheng, Meng Meiqi, Wu Xuanyi, etc., becoming the biggest beneficiary of the traffic star era.
Such an important figure, Lehua Entertainment is of course bound to development in the form of equity. According to the latest new prospectus, Han Geng was promoted to star shareholder through 2.47% of the shares of Tibet Huaguoguo. Zhou Bichang and Huang Zheng, who were once star shareholders, withdrew from the shareholder sequence.
Before the listing, the sudden dividend was 600 million, and Du Hua alone took 300 million
Like the story of most listed companies, Lehua's shareholders also chose to cash out dividends on the eve of listing.
According to the data, Lehua Entertainment distributed a dividend of 200 million yuan in 2020, and in March 2022, it distributed a dividend of 400 million yuan before the listing, with a total dividend dividend amount of 600 million yuan, which divided up the 746 million yuan of profit in the previous 3 years.
Who benefits from such a rush to cash out?
According to the data, before the listing, Ms. Du Hua, the founder and chairman of the company, held 50.18% of the shares, Wang Huan held 4.77%, Quantum Leap held 4.74%, Chinese Culture held 14.25%, and Ali Pictures held 14.25%.
This means that Du Hua alone has received 300 million yuan of dividends of 600 million yuan in the past 2 years, and she is the biggest beneficiary, as for institutional shareholders, they have also obtained objective returns.
Valuations have risen all the way to 2.5 billion yuan, and follow-up support is unlikely to continue
Lehua Entertainment's valuation has been on the rise.
As early as 2014, Li Ruigang's Shanghai Cultural Investment also invested in Lehua Entertainment and obtained a 25% stake in Lehua for 254 million yuan, so that the valuation of Lehua Entertainment at that time was around 1 billion yuan.
At the end of 2015, the listed company Gongda Electroacoustic planned to acquire Lehua Entertainment 100% in the form of "stock + cash", when the valuation of Lehua soared to 2.32 billion yuan, more than doubling in just over a year.
In August 2018, ByteDance acquired a 4.99% stake for 125 million yuan, and the valuation of Lehua Entertainment reached 2.5 billion yuan, which means that Lehua Entertainment was not affected by the failure of the acquisition, but the valuation has risen a little.
Now more than 3 years have passed, Lehua Entertainment has no new financing, so the latest valuation is also difficult to estimate, but from the perspective that Hong Kong stocks do not welcome film and television entertainment companies, lehua entertainment listed at this time will not have too much premium in valuation.
Moreover, the capital market environment is volatile, and 2022 is destined to be turbulent, at this time, the listed Lehua is likely to copy the trajectory of the straw bear: listing is the highlight, and then start a long downward journey.