Media, Content, and Film Stocks: Time to Smile?

Vaccine Development Optimism and Peak Season Entry
Jaycontentree, SBS, CJ CGV Up

[Asia Economy Reporter Oh Ju-yeon] Thanks to expectations for the development of a novel coronavirus infection (COVID-19) vaccine, the traditional peak season in the fourth quarter, and the recent rise in the stock market boosting risk investor sentiment, media, content, and movie-related stocks, which had been subdued for a while, are now seeing a bright outlook.

According to the Korea Exchange on the 16th, content-related stocks such as J Contentree, Studio Dragon, SBS, and CJ ENM are also seeing increased expectations for stock price rises as they enter the fourth quarter peak season.

J Contentree, a movie and drama production company, rose 26.5% from 25,100 KRW at the closing price on the 2nd to 31,750 KRW during trading on the day, and Studio Dragon increased 3.1% from 78,500 KRW to 80,900 KRW. SBS and CJ ENM also rose by 3.8% and 3.1%, respectively. The growing expectations for the opening of the Chinese market and the recent strengthened drama lineup with rising viewership are interpreted as factors contributing to the simultaneous rise in these stocks. In the case of SBS, third-quarter operating profit is expected to turn positive, and the Monday-Tuesday drama "Penthouse" is sailing smoothly, with viewership rising from 9.2% in episode 1 to 14.5% in episode 6. Kim Hoe-jae, a researcher at Daishin Securities, forecasted, "As SBS fully enters the tentpole market (leading main works or blockbusters in the market), profitability is expected to improve."

As viewers gather in front of TVs, advertising sector stocks are also starting to rise. As of 10 a.m. on the day, Cheil Worldwide was trading at 21,750 KRW, up 2.35% from the previous trading day. After the stock price rose relentlessly from the 18,000 KRW range in September-October to the 23,000 KRW range, it entered a pause but expectations for a rebound in the second half are growing. According to FnGuide, Cheil Worldwide's estimated operating profit for the fourth quarter of this year is 66 billion KRW, expected to increase by 27.9% compared to the same period last year. This is because advertising expenditures, which were restrained in the first half due to COVID-19, are being actively executed in the second half, raising expectations for performance improvement. Innocean also saw its stock price rise 4.0% from 58,100 KRW on the 2nd to 60,400 KRW on the 13th of this month.

Movie-related industries are also stretching out thanks to news of COVID vaccine development. CJ CGV recorded an operating loss of 96.8 billion KRW in the third quarter, but it is assessed that the worst is over. Despite COVID-19, the meaningful performance shows that if releases appear, audience numbers can recover. Operating losses are expected to be inevitable in the fourth quarter as well. CJ CGV's fourth-quarter operating loss, estimated by more than three securities firms, is expected to turn to a deficit of 17.3 billion KRW compared to the same period last year, but the loss margin is expected to decrease compared to the previous quarter. The stock price also rose slightly this month, increasing 9.2% from 19,950 KRW on the 2nd to 21,800 KRW during trading on the day. In particular, on the 10th, it surged to 23,900 KRW during trading. Lee Ki-hoon, a researcher at Hana Financial Investment, predicted, "Movies will begin to recover in earnest from the second quarter of next year at the latest."