[Click eStock] "Jcontentree, Upcoming OTT Original Anticipated"

Operating Loss Continues in Last Year 4Q
NH Investment & Securities Maintains J Contentree Target Price at 73,000 Won

[Asia Economy Reporter Gong Byung-sun] Jayconentree's fourth-quarter results for last year are expected to show a loss. However, original content aired on online video services (OTT) starting this year is anticipated to bring success.

On the 20th, NH Investment & Securities estimated Jayconentree's fourth-quarter sales for last year at 226.5 billion KRW, a 148% increase compared to the same period last year, and operating losses continuing at 12.7 billion KRW for the same period. The operating loss is about 17.6% below the market consensus.

The poor performance of the broadcasting division is believed to have been reflected in the results. In the broadcasting division, sales increased significantly as revenue related to simple outsourcing from various domestic and international production companies acquired in the third quarter of last year was recognized. However, costs were also reflected simultaneously, worsening profitability. Additionally, selling and administrative expenses and PPA (amortization of intangible assets during corporate acquisition) amortization costs of 7 billion KRW occurred due to the acquisition, making the performance burden inevitable.

The theater division's performance also fell short of expectations. Although movies such as Spider-Man: No Way Home and Eternals were hits, social distancing measures due to COVID-19 are still causing operational disruptions. NH Investment & Securities estimated Jayconentree's theater division operating loss at 8 billion KRW, continuing the loss compared to the same period last year.

However, the subsidiary's content to be released on OTT this year is expected to achieve positive results. Jayconentree holds content such as Hellbound, released last year, along with Now, We Are Breaking Up, Money Heist, The Uncanny Counter, Suriname, and Casino. On the 28th, Now, We Are Breaking Up will be released on Netflix. The official trailer for Now, We Are Breaking Up has been viewed 6.6 million times in five days, which is ten times higher than other works.

Researcher Lee Hwa-jung of NH Investment & Securities explained, “All of this content was produced by subsidiaries,” adding, “Although the cost increase due to subsidiary acquisitions is a burden, the advantage is securing global hit factors and strengthening its position as a global production company.”

Accordingly, NH Investment & Securities maintained a ‘Buy’ rating and a target price of 73,000 KRW for Jayconentree. The closing price on the previous day was 56,200 KRW.