Would it be okay without BTS… Two views of the hive

Input 2021.04.06 14:00

Hive (formerly Big Hit Entertainment)’s stock price rose sharply on the 6th and is recovering to the level on the day of listing. This is because expectations as a comprehensive entertainment company grew as the news of the acquisition of Ithaca Holdings, an American entertainment agency in charge of the management of famous foreign singers such as Justin Bieber and Ariana Grande, was announced.

According to the Korea Exchange on that day, as of 2 pm, Hive is trading at 258,000 won, an increase of 10,000 won from the previous day. Hive, which was listed on October 15 last year, started at 270,000 won, which is twice the public offering price (135,000 won) and exceeded 350,000 won during the intraday, but eventually ended at 258,000 won. Hive shares did not exceed the listing date (258,000 won) based on the closing price for the next six months.

In the meantime, opinions about Hive have been dominant inside and outside the industry, saying,’I am uneasy after BTS’. All of the BTS members did not go to the military. BTS’ eldest brother Jin (real name Kim Seok-jin), born in 1992, is highly likely to enlist within this year as it is impossible to postpone military service without special reasons from the age of 28 due to the revision of the Military Service Act in May 2018. Also, since the age difference between Jin and the youngest Jungkook is 5 years old, the gap due to enlistment is inevitably prolonged.

However, it is said that Hive’s aggressive investments and alliances, including the acquisition of Ithaca Holdings, are alleviating such anxiety. BTS accounted for 97% of Hive’s total sales in 2019, but it fell to 85% through the acquisition of Pledis last year. There is also a forecast that it will drop to 60% this year.

For the past 6 months after listing, Hive ▲ acquired V Live ▲YG PLUS(037270)Two major shareholder investment ▲Universal Music and two joint ventures ▲Acquisition of Ithaka. Hive announced on the 2nd that its subsidiary Big Hit America acquired a 100% stake in Ithaca Holdings, which operates in various fields such as music, IT, film, and culture, for 1.18 trillion won.

Ithaca Holdings is a comprehensive media holding company founded by Scooter Brown, a world-class pop star, and includes world-renowned singers Justin Bieber and Ariana Grande. Last year’s net profit was 204.5 billion won, higher than Hive’s net profit of 81.6 billion won. Separately, Hive established a joint venture with Universal Music and is raising another boy group targeting the global market through auditions.

In addition, it took over the Naver VLive business unit, an online platform that connects artists and fans, and handed over a 49% stake in Weverse to Naver. Then, using the proceeds from the sale of shares YG Entertainment (122870)It acquired an 18% stake in YG PLUS, an affiliate.

Hive has also made investments to increase technological competitiveness. It established a joint venture with Keithwe Mobile, a live streaming solution company in the United States, and showed improved video quality at online concerts through this. For more realistic online content, Naver has invested 12 billion won and 4 billion won respectively in Zepeto, an avatar-generating app operated by Naver, and Superton, an artificial intelligence audio company.

The stock market is also raising the target price at the same time, saying that Hive is expected to strengthen its global capabilities. Ebest Investment & Securities proposed raising the target price from 350,000 won to 502,000 won. In addition, ▲ Hana Financial Investment (320,000 won → 330,000 won) ▲ Yuanta Securities (260,000 won → 350,000 won) ▲ Korea Investment & Securities (310,000 won → 340,000 won) ▲ KTB Investment & Securities (250,000 won → 330,000 won) raise the target price. I uploaded it all at once.

However, it is questionable whether the decision to create a new’BIGHIT MUSIC’ by dividing the core business album and label business will receive sympathy from investors. Theoretically, there is no change in corporate value, but it is pointed out that shareholder value may be dilute as the stake is diluted by attracting external investment in the future. Hive plans to hold a general shareholders’ meeting for the division on May 14th.

An entertainment official said, “With this acquisition, sales of Weverse Shops that sell their goods (planned products) based on intellectual property rights (IP) of global artists besides BTS will increase significantly.” “It is an anxiety factor that Hive’s core business units, which account for more than 40% of its annual sales, will be removed.”