[Click eStock] DearU, SM Entertainment Stake Sale's Biggest Beneficiary 'Target Price Up'

[Asia Economy Reporter Lee Seon-ae] Shinhan Investment Corp. announced on the 9th that it maintains a buy rating on DearU and raises the target price to 56,000 KRW. This is because SM Entertainment (SM Entertainment) is expected to be a clear primary beneficiary regardless of who acquires it.

DearU is the only publicly listed company in the fandom platform sector. It entered the KOSDAQ market in November 2021, supported by the growth potential of its main service, Bubble. As of Q3 last year, 119 teams and 362 artists communicate with fans through Bubble. Monthly paid subscribers increased from 900,000 in 2020 to 1.7 million in 2022. Over 70% of subscribers are foreigners from countries such as China and Japan.

Ji In-hae, a researcher at Shinhan Investment Corp., stated, "The new owner of SM, as confirmed by media reports, is largely narrowed down to Kakao Entertainment, CJ ENM, and HYBE. Although the stock prices of SM and the acquiring party may experience high volatility depending on who acquires it and at what price, it seems certain that DearU will be the biggest beneficiary."

He added, "If Kakao Entertainment acquires SM, since Kakao's DNA is a platform, it will maximize DearU's value the most. CJ ENM could enable famous affiliated rappers to join Bubble, and HYBE could hold over 90% of K-pop IP (intellectual property) through the potential integration of Weverse and DearU," he explained.

Currently, under Kakao Entertainment are ▶Starship (IVE, MONSTA X, Song Seung-heon) ▶EDAM (IU, Shin Se-kyung) ▶Antenna (Yoo Jae-suk, Sam Kim, Lee Mi-joo) ▶BH (Lee Byung-hun, Kim Go-eun, Han Ji-min) ▶Soop Entertainment (Gong Yoo, Gong Hyo-jin, Suzy, Nam Joo-hyuk), among others. CJ ENM holds artist IPs such as ▶AOMG (???D, Gray, Lee Hi) ▶Higher Music (pH-1, GroovyRoom) ▶Amoeba Culture (Dynamic Duo) ▶Stone Music (Heize, Davichi).

Researcher Ji said, "DearU currently generates steady profits of over 4 billion KRW per quarter from subscribers alone, and subscriber growth from new IP entries will directly translate into profits. We need to observe how SM will be sold, but if sold to each company, the expected effects are more than just imagination, with many promising business synergies," he explained.

Meanwhile, monthly paid subscribers are expected to increase by at least 2.3 million by the end of this year. This is due to the effects of Universe (400,000 subscribers) starting from February and the launch of the Android version in China (200,000 to 300,000 subscribers). Overseas B2B partner contracts, enhancement of live features, and the launch of the My Home service in 2024 are expected to drive rapid business expansion.