[Into the Stocks] 'Suriname' Hits Contentree Central, More to Look Forward to

A scene from the Netflix series "Suriname." Photo by Netflix

[Asia Economy Reporter Lee Jung-yoon] Contentree Joongang is receiving high expectations as the Netflix original series 'Suriname' is released. Due to the Suriname effect, not only is the stock price rising in the short term, but the release of season 2 of previously popular content is also scheduled, indicating steady performance improvement.

According to the Korea Exchange on the 15th, Contentree Joongang rebounded by rising 5.55% on the first trading day after the release of Suriname on the global online video service (OTT) Netflix on the 9th of this month. Contentree Joongang has SLL Joongang, which holds 100% of the shares of Perfect Storm Film, the co-producer of Suriname, as its affiliate. Suriname depicts a story where a civilian businessman cooperates with the National Intelligence Service's secret operation to capture a Korean drug lord who has taken control of Suriname.

The broadcasting division of Contentree Joongang is gradually emerging from operating losses and showing growth. Operating losses decreased from 11.1 billion KRW in Q1 to 4.1 billion KRW in Q2 this year, and the market expects a turnaround to profit from Q3. Sales in Q1 increased by 9.3% year-on-year to 111 billion KRW, and Q2 recorded 194.3 billion KRW, up 72.6%.

Contentree Joongang has supplied a total of seven original works to Netflix so far. Before Suriname, which ranked third globally in the TV show category, it supplied two works last year, 'D.P.' and 'Hellbound,' and this year five works including 'All of Us Are Dead' and 'Money Heist.' In addition, it supplies content to various platforms such as TVING and Disney Plus besides Netflix. Notably, season 2 of popular works like 'D.P.' and 'All of Us Are Dead' is expected to be released next year.

The theater division also succeeded in turning a profit from Q2 this year as COVID-19 quarantine measures eased. Although it recorded an operating loss of 19.1 billion KRW in Q1, it posted an operating profit of 3.2 billion KRW in Q2. Furthermore, it is seeking business expansion into space business; Contentree Joongang announced on the 29th of last month that it will acquire 100% of the shares of Playtime Group, which operates indoor playgrounds for kids, for 125 billion KRW. Playtime is the number one indoor playground operator, owning a total of 206 stores as of May this year, including 96 directly operated stores and 110 franchises. The expected acquisition date is November 25.

Experts advise focusing on the period after this year. Hyunji Lee, a researcher at Eugene Investment & Securities, said, "Operating losses exceeded 30 billion KRW in Q1 this year, so an annual profit on a consolidated basis seems difficult," adding, "However, next year, with the release of season 2 works and the synergy from acquiring Playtime, expectations can be raised." Kim Hoe-jae, a researcher at Daishin Securities, said, "In the short term, the results of major works will be reflected, but the important point is that the number of trading platforms is increasing and there are more transactions with guaranteed profitability like originals," adding, "It is expected that performance will steadily improve, not just short-term trends."