Research by iFAST

Yeo Hui Shi

Published on 25 Mat 2021

GHY Culture & Media (SGX:XJB) has recently appointed Lian Lee Lee as its deputy CEO – something investors should take note of.

  • It was recently announced that GHY Culture & Media (SGX:XJB) has appointed Lian Lee Lee as its Deputy CEO. She is the spouse of John Ho Ah Huat, who is a substantial shareholder of GHY and is also on SGX’s directors’ and executive officers’ watchlist.
  • In response to SGX queries, GHY stated that Ms Lian acts independently of Mr Ho. GHY finds her to be a suitable candidate, after considering her experience in the media and entertainment industry in Singapore and the region, and that she is a past director of the Group.
  • In terms of GHY’s fundamentals, the resumption of concert production activities would be a major earnings growth. While waiting for the resumption in concert production activities, the management expects its strong pipeline of drama and film projects to sustain growth and earnings resiliency.

GHY Culture & Media (SGX:XJB) is a producer of Chinese dramas and films, and has also been undertaking the production of Jay Chou’s sell-out “Carnival” World Tour in Asia. It has presence in both China and Singapore.

In this article, we provide an update on the company following a recent development.

Appointment of Group Deputy CEO

On 14 May 2021, it was announced that GHY has appointed Lian Lee Lee as its Deputy CEO. Ms Lian was previously an executive director at GHY from September 2017 to June 2018 and from November 2019 to March 2020.

Ms Lian is also the spouse of John Ho Ah Huat, who is a substantial shareholder as well as GHY’s Group Adviser. Mr Ho had from time to time introduced business contacts and presented business opportunities to GHY, but he is not involved in the day-to-day operations of GHY and does not participate in any of the execution or implementation of business strategies.

However, certain disciplinary actions were taken by SGX against Mr Ho with regards to Scorpio East (back when he was the CEO) in October 2011 and as a result, he was placed on SGX’s directors’ and executive officers’ watchlist. Meanwhile, Ms Lian had held an executive position in Scorpio East, but was not involved in the disciplinary actions taken by SGX against Scorpio East and some of its directors.

What came as a surprise is that, according to GHY’s prospectus lodged in end-2020, Mr Ho has provided an undertaking to GHY that he will not procure any of his nominees, to be appointed as a director or executive officer of any of the entities in GHY for so long as he is named in SGX’s directors’ and executive officers’ watchlist.

It was also stated in the prospectus that GHY’s nominating committee will also ensure that none of Mr Ho and/or his nominees will be appointed as a director or executive officer of any of the entities in the Group for so long as Mr Ho is named in SGX’s directors’ and executive officers’ watchlist.

Therefore, given how GHY has appointed Mr Ho’s spouse as its Deputy CEO, GHY received a few queries from the SGX RegCo on 18 May 2021.

GHY’s response to SGX queries

In GHY’s response to the queries, it was mentioned that Ms Lian is just an “associate” of Mr Ho. GHY wishes to highlight that Ms Lian is not Mr Ho’s nominee or a nominee of any party, as she has demonstrated that she acts independently.

GHY points to the evidence of her vast working experience, which includes having more than 25 years of experience in the media and entertainment industry in Singapore and the region, and was entrusted with leadership roles and responsibilities.

GHY had begun searching for a Group Deputy CEO in view of its business expansion in Singapore and Malaysia. As the media and entertainment industry in Singapore is a niche market, GHY only received two applications, including Ms Lian’s.

Ms Lian was chosen over the other candidate as the latter did not have the relevant experience in the areas of business development and expansion, or drama and film distribution to video streaming platforms. It was also taken into consideration that Ms Lian is familiar with GHY’s operations, having been a past director at the Group.

Resumption of concerts will be a major earnings driver and earnings visibility remains strong

We believe that we are not in a position to provide our views on the recent development at GHY, aside from keeping investors informed of the information that is publicly available.

However, from a business operations’ perspective, we believe the potential resumption of concerts could be a major driver of earnings. GHY’s concert production business first commenced in the second half of FY2019. So far, only three concerts have been successfully produced until the pandemic hit in early 2020. The concert production business accounted for around 12% of total revenue in FY2020.

As shared by the management, the revenue contribution would have been much higher at around 30% to 40% if concerts have not been postponed or cancelled due to the pandemic. Hence, depending on the developments of the pandemic, the resumption of concert production activities could be major driver of earnings growth for GHY.

As mentioned in our previous article, GHY’s core business is in the production of Chinese dramas and films. It has a strong pipeline of drama and film projects with 13 dramas and one film, of which production are expected to take place and/or expected to be released in FY2021 and FY2022. This provides earnings visibility over the next two years.

Meanwhile, a small amount of concert productions is still expected to take place in the near term, as they were postponements from 2020. Notwithstanding the pandemic, the Jay Chou Carnival World Tour organised by GHY is still slated to be conducted in Sydney on October 2021. Following this, a concert will also be held in Kuala Lumpur on February 2022.

While waiting for the resumption in its concert production business, the management expects its strong pipeline of drama and film projects to sustain growth and earnings resiliency. It is also worth highlighting that GHY has a stronger balance sheet as compared to its Chinese peers (Table 1). With a net cash position of SGD 118.2 million (including lease liabilities of SGD 4.7 million), GHY could expand on its core business and at the same time, minimise impact from any delays in the recovery of its concert production business.

We do not have a recommendation for GHY Culture & Media.

Table 1: GHY has a healthy net debt to equity ratio
NameNet Debt to Equity (%)
Cathay Media and Education-74.0
GHY Culture & Media-63.1
Zhejiang Huace Film & TV-30.6
Huayi Brothers-5.9
Ciwen Media Group-1.5
Strawbear Entertainment Group31.6
Average-23.9
Source: Bloomberg Finance L.P., iFAST CompilationsData as of 31 December 2020

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.