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Unusual - may be a junk
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stockhunters
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07-Jan-2021 19:40
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Since last month when the government officiated the phase 3, Unsual edged up from 13cents to 17 cents before the announcement. A lot of hopes were pouring into it that the government may soon relax the rule at MICE exhibition, and market was expecting relaxation in those larger scale events like concerts. However, it wasn&rsquo t the case. The stock was artificially supported subsequently with thin volume Everyday. It was &ldquo well supported&rdquo at 17 cents here and if you are expecting it to cross further up, you may have to think twice. Unusual&rsquo s core business is in the production as well as the sponsor for the concerts. It relies heavily on the artists and due to its long-standing relationship with the artists, they have always become the sponsors for most popular artists from Taiwan, Singapore and Hong Kong. In the FY20 (their financial year falls in March, so their actual performance reflected performance of FY19), they registered one of highest earnings record of $13mil, and if you could recall, they had series of strong concert pipelines like Jackie Cheung, JJ Lin, GEM, Lee Hom etc, and their concerts were not only in Singapore, Malaysia, China, they had also brought the artists to US and Australia. Since then they had walked down the hill. Ever since the covid pandemic, Unusual was unable to change its business model and was struggle badly. The half year performance showed that they had registered merely $1mil of revenue with $3mil losses, which were rather disappointing. One could argue that they were badly hit by this pandemic and may soon bounce back strongly after the covid which will not be the case, and let me elaborate further. Let&rsquo s look at this, most of the artists have started to perform online since the pandemic. If Unusual is agile enough to fine tune their business model by capturing more income from online concerts, they would have already captured a good revenue during this pandemic time. During the global lockdown, a lot of influencers had performed online and they had since earned a good source of income by selling virtual gifts or getting advert sponsorships during the live performance. Unusual is arguably one of the industry veteran could not even capture any of this opportunity during this pandemic which spells how incompetent is the management. If you think the cases have tapered in Singapore and the government may soon relax the rule, just look at the cases in other regions around us. Even if the government allows them to organise concert, will those artists actually fly in to Singapore just to perform in Singapore? Historically the artists will perform in few regions in a month, and even if the cases ease in Singapore, no single artist will fly in to perform here, the market is too small here, and they will not be able to achieve economies of scale. Just look at the earnings, if you were to take their peak earnings of $13mil in FY19 as benchmark, current market cap of circa $170mil has already fetched a PE of 13x, this is exorbitantly high. And that is the peak earnings which the company had so many rounds of concerts from many many many artists in a year, and when do you think the company may replicate the same earnings again? And even if they finally reach that peak earnings again, current valuation is still as high as 13x. So at this point, will you still hold this little junk which only has $50mil net assets which most of assets come from intangible. Meanwhile, how much do you think they can make by just collaborating with JJ Lin ? So think twice , you may save your dime by investing in other stocks in Singapore. |
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