'Enter Big 3', Institutional Love Calls with "Hit After Hit"

[Asia Economy Reporter Koh Hyung-kwang] The stock prices of the 'Big 3' entertainment companies?JYP Entertainment, YG Entertainment, and SM Entertainment?have recently shown a sharp upward trend, supported by institutional investors' buying momentum. This is analyzed to reflect performance that surpasses the impact of the novel coronavirus disease (COVID-19) and the anticipation of Big Hit Entertainment's IPO.

According to the Korea Exchange on the 8th, JYP Entertainment closed at 41,000 KRW on the KOSDAQ market the previous day, up 0.5% from the previous trading day. It has risen for five consecutive trading days, increasing by more than 17% during this period. Compared to the stock price of 27,900 KRW on July 8, two months ago, it has jumped 47%. During the same period, YG Entertainment rose 35.4% from 40,400 KRW to 54,700 KRW, and SM Entertainment recorded a 22.5% increase.

The rise of the 'Big 3' was led by institutional investors. Over the past two months, all three companies were included among the top 10 stocks in net purchases by institutions on the KOSDAQ market. During this period, institutions purchased 45.9 billion KRW worth of JYP Entertainment shares (4th in net purchases). YG Entertainment (7th) and SM Entertainment (8th) also saw net purchases of 40.3 billion KRW and 34.7 billion KRW, respectively.

The fact that institutions have accumulated more than 120 billion KRW in entertainment stocks over the past two months is interpreted as reflecting not only solid second-quarter earnings but also expectations for future growth. SM Entertainment posted an operating profit of 13.2 billion KRW in the second quarter, significantly surpassing the consensus estimate of 3 billion KRW, marking an earnings surprise. This was the result of a sharp increase in album sales due to overseas fandom effects. JYP Entertainment recorded an operating profit of 9.1 billion KRW, similar to the consensus. YG Entertainment, which had been sluggish last year due to the Burning Sun scandal, posted an operating profit of 1.8 billion KRW, a 45% increase compared to the same period last year. Sung Joon-won, a researcher at Shinhan Financial Investment, explained, "In the first half of this year, concert revenue sharply declined due to COVID-19, causing stock prices to fall, but thanks to fans purchasing large volumes of albums, sales grew rapidly, and stock prices have recovered to pre-COVID-19 levels."

The anticipation of the IPO of Big Hit Entertainment, the agency of BTS, also contributed to the rise in entertainment stocks. As the 'K-pop fandom' expands globally, it is analyzed that corporate value will also increase. Kim Jong-min, senior researcher at Samsung Securities, said, "Big Hit is being valued at 30 trillion to 60 trillion KRW in the market, and considering this premium, a general upward adjustment phase for the three entertainment companies, which had faced negative factors, is necessary. Since we have seen hope for Korean artists, the discount is being resolved, and simultaneous momentum gains are expected."

This content was produced with the assistance of AI translation services.