[Into the Stock] JC Contentree, Theater Release Imminent?

With Rapidly Rising Vaccination Rates, JCNT Stock Also ↑
Broadcasting Segment Exceeded Q1 Performance Expectations This Year... But Facing Base Effect Pressure

[Asia Economy Reporter Gong Byung-sun] Along with the rapidly rising vaccination rate, the stock price of Jcontentree is increasing. There are high expectations that both the theater and broadcasting sectors will see positive developments, but concerns are also mixed in.

According to the Korea Exchange, Jcontentree's stock price rose 17.59% over the one-month period from the 14th of last month to the 14th of this month. On the 1st of this month, it even reached this year's highest price of 57,800 KRW. Although the stock price had fallen to 20,200 KRW in March last year due to the slump caused by COVID-19, it has more than doubled since then.

Jcontentree's upward trend aligns with the progress of COVID-19 vaccinations. According to the COVID-19 Vaccination Response Promotion Team, as of the 14th, the first-dose vaccination rate relative to the population was 23%. It was only 7.8% as of the 27th of last month, but within less than three weeks, the vaccination rate nearly tripled.

Will the stagnant Megabox overcome its slump?

There are also forecasts that the slump of Jcontentree's theater chain Megabox will be resolved. According to the Korea Association of Film Exhibitors, the total number of moviegoers last year decreased by 74% compared to the previous year. However, it is expected that this slump can be overcome. Recently, global distributors have been confirming schedules for major content releases in Korea. On the 19th of last month, "Fast & Furious 9" was released. Following that, major films that could not be released last year such as "Black Widow," "Venom," "Eternals," and "Spider-Man" are waiting for their release.

There are also predictions that not only will the theater sector turn profitable in the third quarter of this year, but performance improvements will continue into next year. Oh Tae-wan, a researcher at Korea Investment & Securities, explained, "The number of moviegoers in 2022 will be only about 90% of the 2019 level. Nevertheless, the average ticket price has increased by 20%, and labor costs have decreased by 30%, making it possible to improve operating profit margins."

However, it is still difficult to say that the theater recovery has become visible. Cho Tae-na, a researcher at Heungkuk Securities, said, "Although blockbusters are being released, it will be difficult for the situation to improve easily within the first half of the year. Assuming box office normalization to 70-80% of the fourth quarter level, meaningful performance will be possible from the fourth quarter." Additionally, as the Over-The-Top (OTT) video service industry grows, the proportion of works released simultaneously in OTT and theaters is also increasing. Lee Hyo-jin, a researcher at Meritz Securities, said, "Considering the long-term timeline after the rebound from COVID-19 damage, it is difficult to consider movie theaters a good option."

Broadcasting leads Jcontentree instead of theaters... stronger stamina

Currently, the broadcasting sector is leading Jcontentree instead of theaters. The securities industry analysis indicates that the broadcasting sector's stamina has strengthened as overseas sales have increased. Wednesday-Thursday dramas are regularly sold to Netflix, and overseas OTT sales of Monday-Tuesday and Friday-Saturday dramas continue. Researcher Oh said, "As Chinese OTT platforms target the Southeast Asian market, demand for Korean dramas is increasing. Overseas sales revenue rose from 62.4 billion KRW in 2019 to 85.8 billion KRW last year, and it is expected to increase to 128.8 billion KRW this year."

In fact, the broadcasting sector exceeded market expectations (consensus) in the first quarter of this year. Jcontentree's first-quarter operating profit in the broadcasting sector recorded 13 billion KRW, surpassing the consensus. This was because the production cost of the tentpole drama "Sisyphus," which is responsible for the production company's annual cash flow, significantly increased to the 20 billion KRW range, expanding the profit margin. Additionally, simultaneous Wednesday and Thursday slot broadcasts on Netflix further contributed to margin growth.

Of course, there are also concerns. Due to the absence of Monday-Tuesday dramas in the second quarter, new works are limited to "Law School," "Undercover," and partially recognized "Nevertheless" and "Monthly House." Moreover, "Itaewon Class" had an enormous hit last year, so a base effect burden is expected.

It is also necessary to watch whether direct overseas expansion will act as a positive factor. On the 1st, Jcontentree's subsidiary JTBC Studio announced that it acquired an 80% stake in Tornado Enterprise, the parent company of the U.S. content production company WIIP (Word, Idea, Imagination, Productions), for 133.8 billion KRW. Tornado Enterprise holds 100% of WIIP's shares. WIIP has previously produced works such as "Dickinson" and "Dummy."

Shin Soo-yeon, a researcher at Shin Young Securities, explained, "Through this acquisition, Jcontentree can apply advanced capabilities of the U.S. content production market to the Asian market. It is also seen as an opportunity to apply the intellectual property (IP) that Jcontentree possesses to the U.S. market."

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