Now a Full-fledged Global Platform Player
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
Adhering to a Buy rating, we raise our TP on HYBE to W370,000 in consideration of the firm’s leading position in the fandom platform arena, backed by the securing of global artists for its Weverse Shop. HYBE’s artist lineup is also being strengthened via the acquisition of Ithaca and the development of new talent
Now a full-fledged global platform player
We maintain a Buy rating on HYBE. In order to both strengthen its main business (music) and expand its platform business, the firm has recently acquired stakes in YG PLUS (18%), Ithaca Holdings (100%), and NAVER’s VLIVE division. As a result, HYBE has successfully secured: 1) global top-tier artist IP; and 2) the entrance of hit group Blackpink into Weverse Shop. Through these activities, HYBE has cemented a leading position as the world’s only comprehensive entertainment and platform player. Expectations for both Ithaca acquisition effects, which should kick off in earnest once offline concert tours resume, and the launch of new talent also remain valid
We raise our TP by 6% to W370,000 (formerly W350,000). Amid rising ARPPU for existing subscribers, traffic is also expanding on the entry of major global artists. Considering its growth and improving earnings visibility, we hike our estimate for the operating value of the Weverse platform
Lineup strengthening; dependence on BTS easing
Through its acquisition of Ithaca Holdings, HYBE has acquired Justin Bieber and Ariana Grande. Before Covid-19, the number of performances per world tour for these artists came to 150 and 90 (based on arena and dome concerts), respectively—figures which demonstrate strong global fandom. Effects of the acquisition are to be maximized once offline concert tours resume and entrance into Weverse Shop is complete. In particular, we are upbeat towards the start of Justin Bieber’s North American tour (52 shows; scheduled from Feb 2022)
HYBE is also working on the in-house development of new talent. We draw attention to Trainee A, which is likely to become Big Hit Music’s next group. Having amassed 240,000 YouTube subscribers in under half a year, Trainee A is already attracting a loyal fanbase before its debut. Related monetization should be possible immediately after debut, which is expected around mid-2022
2Q21 review: One-off expenses of W10bn + start of PPA amortization reflected
HYBE posted 2Q21 sales of W278.6bn (+79% y-y) and OP of W28bn (-6% y-y), with OP arriving somewhat short of consensus. One-off expenses (W10bn related to Ithaca acquisition) and the start of PPA amortization for Ithaca (W2.5bn/month) were reflected in the quarter. McDonald’s collaboration, Butter (BTS song), and fan meeting merchandise (MD)-related earnings are to be reflected in 3Q21 due to global logistics issues