[Click eStock] "Studio Dragon, Disappointing Block Deal... Expecting Stock Price Recovery in Second Half"

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating on Studio Dragon on the 9th, expressing expectations for a stock price recovery in the second half of the year and set a target price of 98,000 KRW.

The expected sales and operating profit for the first quarter are 107.7 billion KRW and 10.9 billion KRW respectively, representing a decrease of 4% and 2% compared to the same period last year. Operating profit is forecasted to meet the market expectation of 11.2 billion KRW.

Lee Ki-hoon, a researcher at Hana Financial Investment, said, "In the last quarter, the popularity of dramas declined, leading to poor sales in VOD and PPL, resulting in a loss. However, with CPI recovering, normal profits are expected to be recorded." He added, "If the 2018 production '100 Days My Prince,' which was scheduled on Japan's terrestrial broadcaster NHK, becomes a hit, additional growth is expected from the sale of older works."

On the 7th, CJ ENM sold 2.25 million shares of Studio Dragon at a 9% discount, priced at 73,800 KRW per share. Although the purpose was to secure investment funds for future growth and strengthening business competitiveness, it is somewhat disappointing from the shareholders' perspective.

Researcher Lee Ki-hoon pointed out, "Looking at the price and share ratio, when about 5% of shares were sold to Netflix in the past, it took one year and three months after the first disclosure in 2018, but this sale was decided in a short period. Also, while the sale to Netflix was made at the average price of the previous five trading days, this time a high discount rate was applied."

However, the stock price is expected to recover quickly in the second half of the year. This is because expectations are rising for 'The King,' written by writer Kim Eun-sook. It is estimated that 'The King' has already surpassed its break-even point.

Researcher Lee Ki-hoon said, "'Goblin' and 'Mr. Sunshine' by writer Kim Eun-sook were key works that increased the company's value," and forecasted, "Considering the anticipation of Xi Jinping's visit to Korea in the second half of the year, the stock price will recover quickly before the third quarter."