Korea Investment & Securities Co. gave Contentree JoongAng a "neutral" investment opinion. Although earnings are accelerating on the back of an expanded content lineup and theater restructuring, the firm judged that the financial burden is heavy at this point.
Kim Jeong-chan, an analyst at Korea Investment & Securities Co., said, "Earnings recovery will accelerate as content subsidiary SLL secures investment capacity and theater subsidiary Megabox improves its fundamentals," but added, "Given the high financial burden at this point, we recommend approaching after confirming whether liquidity can be secured."
Contentree JoongAng posted revenue of 269.6 billion won and operating profit of 4.6 billion won on a consolidation basis in the fourth quarter of last year. Revenue rose 32.5% from a year earlier, and operating profit swung to a surplus.
By subsidiary, SLL recorded revenue of 144.5 billion won and operating profit of 1.3 billion won, also turning to a surplus. While captive broadcast episodes were 34, down two from a year earlier, episodes aired on OTT and other channels jumped from 65 to 97, driving improved results.
Megabox reported revenue of 100.2 billion won and operating profit of 3 billion won. Thanks to the success of foreign films such as "Avatar 3" and "Zootopia 2," the number of moviegoers increased 27.4% from a year earlier, and ATP (average ticket price) and CPP (concessions sales per person) also rose on the back of a higher share of premium screenings and strong merchandise sales.
The two subsidiaries are continuing strategies to improve profitability. Megabox is working to increase per-seat profitability through expanding premium auditoriums, while also cutting fixed costs and strengthening exclusive content. SLL is likewise expected to have a content lineup of about 29 titles this year, up from a year earlier.
Short-term financial risk, however, is cited as a variable. Kim said, "Contentree JoongAng faces repayment of convertible bonds (CB) on the 27th, and discussions on a Megabox merger are scheduled to proceed until Mar. 31," adding, "We need to see whether liquidity can be secured before taking a position."