Bedo Finance found that on January 22, music entertainment service provider Fenghua Qiushi Group Holdings Limited (hereinafter referred to as "Fenghua Qiushi") submitted a prospectus on the Hong Kong Stock Exchange to prepare for listing on the Hong Kong Stock Exchange. It is understood that the company is mainly engaged in music copyright licensing and music recording business.
According to the prospectus, according to the report of China Insight Consulting, according to the revenue generated by China's music copyright licensing and music recording in 2019, Fenghua Qiushi ranked 18th among music record companies, with a market share of about 0.6%. Among China-based music labels, it ranks 7th with a market share of about 1.5%.
Managed artists include Lu Han, etc., and the gross profit margin is extremely high
Feng Huaqiu said that it has been establishing a music library since 2011, and its music library has continued to grow from 329 musical works at the end of 2018 to 425 musical works on the final practically feasible date (11 of which have not yet been released). Among them, 391 pieces were made by Fenghua Qiushi.
As of the end of the reporting period, Fenghua Qiushi managed a total of 10 artists and 10 trainee artists, including Black Panther (since 2012), Lu Han (since 2015), Hao Yun (since 2016) and Zhao Zhao (since 2016).
According to the prospectus, in 2018, 2019 and the first three quarters of 2020, Fenghua Qiushi's revenue was about 100.4 million yuan, 0.556 billion yuan and 0.585 billion yuan respectively; in the same period, its net profit was about 0.186 billion yuan, 0.188 billion yuan and 0.450 billion yuan, respectively.
Fenghua Qiushi found that the gross profit margin of Fenghua Qiushi was extremely high. During the reporting period, its gross profit was 51.734 million yuan, 45.685 million yuan and 48.932 million yuan, respectively, and the corresponding gross profit margin increased from 51.5% in 2018 to 82.2% in 2019 and increased to 83.6% in the first three quarters of 2020.
Among them, music copyright licensing and music recording business are the main businesses of Fenghua Qiushi. During the reporting period, the revenue of this business was 30.444 million yuan, 50.560 million yuan and 57.313 million yuan, accounting for 30.3%, 90.9% and 98.0% respectively.
At the same time, Fenghua Qiushi also operates concert hosting and production, and artist management business. During the reporting period, the revenue of its concert hosting and production decreased from 60.737 million yuan in 2018 to 1.806 million yuan in 2019, accounting for 3.3% from 60.5%.
Fenghua Qiushi said that its main business segments have not been significantly affected by the new crown epidemic. However, its concert hosting and production and artist management businesses, which usually involve a large number of people gathering and the presence of leading artists, have been affected by the cancellation, suspension or rescheduling of concerts or commercial events.
Very dependent on Tencent Music, Lu Han plays an important role
According to fenghua qiushi disclosure, during the reporting period, its total income from the five major customers was about 36 million yuan, 48 million yuan and 56.4 million yuan respectively, accounting for about 35.9%, 86.3% and 96.4% of its total revenue for the current period. As of the end of the reporting period, almost all of Fenghua Qiushi's revenue was contributed by the top five customers.
Bedo Finance found that the most important role in Fenghua Qiushi's revenue is tencent music entertainment group (NYSE:TME). According to the prospectus, Fenghua Qiushi's largest client, Client X, generated revenues of approximately 26.2%, 78.6% and 70.7% of the Group's total revenue during the reporting period.
Feng Huaqiu said that Customer X is a parent company listed on the New York Stock Exchange, and its main business includes operating an online music entertainment platform, accounting for about 80% of domestic music copyright in 2019. According to Bedo Finance, customer X listed on the New York Stock Exchange is Tencent Music Entertainment Group.
In other words, Fenghua Qiushi is extremely dependent on the procurement of Tencent Music Entertainment Group. Feng Huaqiu said that its future financial performance will depend on the latter. The success of the latter depends on a number of factors, including its selected repertoire, audience preferences for musical works, and market acceptance.
Similarly, on the supply side, Fenghua Qiushi is also very dependent on its music copyright owners, that is, artists, production companies, etc. Among them, the artist Lu Han gave a full guarantee for Fenghua Qiushi. During the reporting period, the total procurement costs paid to Luhan Group (Luhan) accounted for about 35.8%, 46.1% and 22.8% of the total procurement costs, respectively.
Lu Han
At the same time, LuHan's direct attributable income in 2018, 2019 and the first three quarters of 2020 was about 70.9 million yuan, 14.2 million yuan and 7.2 million yuan, accounting for about 70.6%, 25.5% and 12.3% of its total revenue, respectively. This also means that Lu Han's weight is quite heavy.
Earlier, Huang Zhenfeng, co-founder of Fenghua Qiushi, said in an interview, "Our cooperation with Lu Han is quite tacit and we trust each other. After his return to China, we must make works with his own label, highlighting his identity and temperament as a singer. ”
Including Lu Han, in 2018, 2019 and the first three quarters of 2020, the total procurement costs of Fenghua Qiushi to the five major suppliers were about 27.1 million yuan, 4.9 million yuan and 5.6 million yuan, accounting for about 60.6%, 88.1% and 84.4% of the group's total procurement costs respectively.
Li Hui and 6 other people hold the shares, and 37 Mutual Entertainment holds 20% of the shares
It is understood that Shanghai Fu Rui Jisheng Cultural Communication Partnership (Limited Partnership) and New Clue (Beijing) Film and Television Investment Co., Ltd. are also gradually playing an increasingly important role in the supplier system of Fenghua Qiushi. Among them, the latter is a related party of Fenghua Qiushi, and 37 Mutual Entertainment (SZ: 002555), Huang Zhenfeng, Tang Yuxiao, etc. all hold shares.
Among them, Huang Zhenfeng and Tang Yuxiao are the co-founders of Fenghua Qiushi. The prospectus discloses that according to the unanimous action agreement, Li Hui, the founder and chairman of Fenghua Qiushi, Tang Yuxiao, Bian Zhenmin, Tang Haizhen, Huang Zhenfeng, Wu Jun and other six people are the consistent actors, which are managed and controlled by Li Hui.
According to the prospectus, Fenghua Qiushi's executives include its founder and chairman of the board of directors Li Hui, chief executive officer and director Tang Zhengyi, chief content officer and deputy general manager Zhao Mingyi, financial director Chen Yijun, legal department director Wang Min, copyright licensing department director Wang Lin, concert hosting and production department director Wang Jirong, etc.
In terms of equity, Li Hui, Tang Yuxiao, Bian Zhenmin, Tang Haizhen, Huang Zhenfeng and Wu Jun directly held 20.8%, 15.36%, 4.8%, 4.8%, 3.84% and 2.4% respectively, and 6 people also held 28% indirectly through Zhangshu Fenghua. According to this calculation, Li Hui and 6 other people hold a total of 80% of the equity of Fenghua Qiushi and jointly form the controlling shareholder.
In addition to Li Hui, Tang Yuxiao and other shareholdings, Fenghua Qiushi also introduced external investors in 2016 - 37 Interactive Entertainment. It is understood that Sanqi Interactive Entertainment holds 20% of the company's equity through Huai'an Sanqi. According to the prospectus, the consideration of the shareholding of 37 Interactive Entertainment was 120.2 million yuan.
On July 15, 2019, Huai'an Sanqi transferred its 20% equity interest in Fenghua Qiushi to Anhui Shangqu Play Network Technology Co., Ltd., a subsidiary of Sanqi Interactive Entertainment. Fenghua Qiushi said that it provided event production services for the Spring Festival celebrations of 37 Mutual Entertainment, contributing revenue to its concert hosting and production business.