[Click e-Stock] "ContentreeJoongAng to See Performance Improvement Excluding Megabox... Buying Opportunity"

On May 9, Hana Securities stated regarding ContentreeJoongAng, "If Megabox is excluded from consolidation following the merger with Lotte Cultureworks (formerly Lotte Cinema), a sharp improvement in performance is expected," adding, "The current stock price is a very strong buy zone."

Lee Kihoon, a researcher at Hana Securities, commented, "If the merger proceeds, it is highly likely that Lotte, which holds the second-largest market share in the domestic multiplex cinema market, will become the surviving entity (and largest shareholder). As a result, ContentreeJoongAng's value as a drama production company will be highlighted."

On the previous day, JoongAng and Lotte announced that they had signed a memorandum of understanding (MOU) for the merger of Megabox JoongAng and Lotte Cultureworks. This is a self-rescue measure taken after profitability became difficult due to a sharp decline in audience numbers, which resulted from post-COVID price increases and viewers leaving for Netflix. They plan to sign the merger agreement as quickly as possible and submit a business combination review report within the year. Through this, they aim to pursue overseas market expansion and strengthen financial stability.

Meanwhile, ContentreeJoongAng's sales in the first quarter amounted to 225.2 billion won, up 2% year-on-year, while operating profit recorded a loss of 12.1 billion won. However, the operating loss was better than the market estimate of a 16.7 billion won loss. Starting this quarter, results are reported separately for the standalone business and for the domestic labels and subsidiary Wiip. Sales and operating profit for these segments were 139.7 billion won and a loss of 4.5 billion won, respectively.

Researcher Lee explained, "The number of separate broadcast episodes was 16, a significant decrease from 38 in the same period last year. This was based on a plan made before the improved recoupment rates from global OTT renegotiations were applied." He added, "Nevertheless, with four episodes related to 'The Summer I Turned Pretty 3' from Wiip being scheduled, profits improved significantly." He continued, "In the second quarter, the remaining seven episodes will all be reflected, and with the addition of tentpole titles such as 'Good Boy,' a substantial improvement in profits is expected."

Megabox recorded a loss of 10.3 billion won as box office attendance dropped sharply to 20.82 million, a 33% decrease.