Foreign investors are paying a special interest in YG Entertainment, mostly thanks to BLACKPINK and BABYMONSTER
According to the Korea Exchange on May 29th, foreign investors purchased KRW 133.1 billion (over USD 100 million) worth of YG Entertainment stocks this month. It is the seventh most purchased stock across the KOSPI and KOSDAQ markets and ranked first on the KOSDAQ. Looking at the entire KOSDAQ market, foreigners are net selling KRW 408.9 billion (over USD 308 million), which draws more attention.
This has drawn even more attention considering that foreign investors have sold a net amount of KRW 40.89 billion in the entire KOSDAQ market.
Compared to other entertainment stocks, YG stands out. The net purchase amount of JYP Entertainment by foreign investors this month was KRW 82.3 billion, while for HYBE (formerly Big Hit Entertainment) it was KRW 54.9 billion, and for SM Entertainment it was KRW 8.1 billion. YG’s net purchase size is overwhelmingly superior.
The stock price is also strong due to the foreign investors’ call. YG Entertainment’s stock price has risen by 50.82% this month, from KRW 61,000 to KRW 92,000. It is the top-performing stock in the entertainment industry. In comparison, JYP Entertainment’s stock price increased by only 26.5%, less than half of YG’s increase. HYBE’s stock price has been stagnant at KRW 270,000 for almost a month, and SM Entertainment’s stock price has decreased by 2.24%.
The leading factor driving investment sentiment is the impressive performance. In the first quarter of this year, YG Entertainment reported an operating profit of KRW 36.5 billion. It has increased by 497.6% compared to the same period last year, surpassing market expectations by more than double. This is the company’s highest quarterly performance.
Expectations for future growth are also high. According to financial information company FNGuide, YG Entertainment’s operating profit for the second quarter is expected to increase by 139.52% to KRW 20.5 billion compared to the same period last year. The expectations for annual operating profit have also been raised. The current outlook (KRW 79.6 billion) has increased by 17.93% compared to that from a month ago (KRW 67.5 billion).
YG’s representative group BLACKPINK is actively thriving, and the rookie girl group BABYMONSTER can become a new growth driver. The ongoing world tour concert of BLACKPINK is expected to greatly contribute to the company’s performance.
Ahn Do Young, a researcher at Korea Investment & Securities, stated, “BLACKPINK’s world tour recorded an operating profit margin of 23% as the number of attendees and royalties increased“. The research also added that since the tour continues until the third and fourth quarters, profitability is expected to remain positive for these quarters as well.
Meanwhile, Choi Jong Kyung, a researcher at Hana Financial Investment, commented, “(YG) artists will continue to be active in the 2nd quarter, so this solid performance is expected to continue”, adding, “BABYMONSTER is also expected to quickly reach a profit realization point, as they have already proven their ability to build a fandom even before debut.”
On the other hand, YG’s stock is considered undervalued compared to its growth. According to the stock market, YG Entertainment’s price-to-earnings ratio (PER) is 29.51 times, which is lower than HYBE (45.03 times) and JYP Entertainment (30.93 times).
Regarding this, Ahn Jin Ah, a researcher at IBEST Investment & Securities, pointed out, “2023 will be the year when the full-fledged growth, led by BLACKPINK and BABYMONSTER, becomes visible.”
Source: FN News