[Click eStock] NEW, Focus on Whether Performance Improves This Year

KB Securities Report

KB Securities explained on the 24th that since NEW is undertaking a paid-in capital increase to expand its production scale, attention should be paid to whether its performance will improve this year.

NEW announced a paid-in capital increase of 25 billion KRW on the 17th. The funds raised through the capital increase will be used as operating funds (17.6 billion KRW) for film production and settlement payments, and debt repayment funds (7.4 billion KRW). The outstanding convertible bond balance reflecting this issuance is 45 billion KRW, which accounts for 18% of the issued shares. Lee Kyung-eun, a researcher at KB Securities, said, “The equity dilution from the convertible bond issuance has already been reflected in the stock price,” adding, “It is now time to focus on the performance improvements expected this year.”

The number of films expected to be released this year is estimated to be 6 to 8, including two films produced by Studio Ennew. This represents a 50% to 100% increase compared to four films last year. The number of drama productions is expected to remain similar to last year, at around 3 to 4 titles. The tentpole works, Good Boy and Hashi-ui Sinru, are expected to start recognizing revenue from the second half of the year. In the case of Moving, revenue recognition has been completed, but depending on its box office performance, it is expected to be a factor in reevaluating NEW’s production capabilities and corporate value.

Improved performance is also expected from subsidiaries that had expanded deficits. With the recovery of moviegoer numbers and the completion of low-profit VFX contracts, profitability improvements are anticipated in the theater and VFX businesses. Researcher Lee Kyung-eun explained, “The music content business, which turned profitable last year, is expected to continue its profitability improvement trend,” adding, “Delays in the release and broadcast of scheduled films and dramas pose risk factors to NEW’s performance.”

NEW was established in 2008 as a film investment and distribution company and was listed on the KOSDAQ market in 2014. Through its headquarters and six subsidiaries, NEW operates in film and drama production and distribution, music production and distribution, VFX business, and cinema operations. As of the third quarter, the sales composition by business segment is 79.1% from films and dramas, 17% from music content, 3.7% from theaters, and 0.3% from others.