BTS Agency Big Hit to Go Public by Year-End... Set to Become Leading Entertainment Stock

[Asia Economy Reporter Koh Hyung-kwang] Big Hit Entertainment, the agency of BTS, has entered the initial public offering (IPO) process. The company's valuation is expected to reach up to 5.2 trillion KRW, making it the leading entertainment stock immediately upon listing.

According to the Korea Exchange on the 30th, Big Hit submitted its preliminary review application for listing on the KOSPI market to the Korea Exchange on the 28th. Established in February 2005, Big Hit's main business is music production and management. As of the previous day, CEO Bang Si-hyuk holds 45.1% of the shares.

According to Hana Financial Investment, Big Hit's corporate value, calculated based on the price-earnings ratio (PER), ranges from a minimum of 3.9 trillion KRW to a maximum of 5.2 trillion KRW. Experts believe that most of Big Hit's corporate value is related to BTS. At the maximum estimate, it ranks around 40th to 50th in market capitalization on the KOSPI.

Researcher Lee Ki-hoon of Hana Financial Investment stated that Big Hit's PER could reach 30 to 40 times, based on recent performance. He explained, "Big Hit, which owns the top 1 and 2 album-selling groups and has the highest proportion of North American sales, can justify a price-earnings multiple of at least 30 to 40 times."

Last year, Big Hit's consolidated revenue was 587.2 billion KRW, operating profit was 98.7 billion KRW, and net profit was 72.4 billion KRW. SM Entertainment, a leading domestic entertainment company, posted an operating profit of 40.4 billion KRW last year, while JYP Entertainment and YG Entertainment recorded 43.5 billion KRW and 2 billion KRW, respectively. Big Hit's operating profit last year exceeded the combined operating profits of the three major agencies.

Big Hit's main artists are BTS. Tomorrow X Together (TXT) is also under Big Hit. Additionally, over the past year, Big Hit has acquired Source Music (label), Superb (gaming), and purchased shares in Pledis (label), securing a top-tier idol lineup including GFriend, NU'EST, and Seventeen.

Researcher Lee said, "Considering various management revenues and TXT's growth rate, the expected revenue for 2021 is at least 750 billion KRW, with operating profit exceeding 150 billion KRW." He added, "With the easing of COVID-19 allowing tours, Big Hit's listing and the BTS ripple effect are expected to drive rapid global fandom growth for K-pop."

Big Hit's lead underwriters for the listing are NH Investment & Securities, Korea Investment & Securities, and JP Morgan. Mirae Asset Daewoo is participating as a co-underwriter. The Korea Exchange will conduct the review within 45 business days after receiving the preliminary review application. The company must submit the listing application and proceed with the public offering process within six months of receiving the preliminary review results. Considering this, Big Hit is expected to join the KOSPI around the end of this year.