JYP, SM, And YG Entertainment All See Growth In Stock Prices
Despite sluggishness in the Korean stock market, due to global trade disputes and the economic uncertainty in Turkey, three major entertainment agencies (known as the “Big 3”) have seen strong growth in their stock prices.
On August 16, the Korea Exchange reported that KOSPI (Korea Composite Stock Price Index) had seen nearly a 1 percent drop. In the securities market, foreign investors sold off 242.7 billion won (about $215 million), which played a major part in the drop. KOSDAQ (Korea Securities Dealer Automated Quotation) also saw their index drop.
In this troubled market, JYP Entertainment saw their stock in KOSDAQ rise 8.21 percent since the last business day, closing out at 25,700 won (about $22.77). On the same day, YG Entertainment saw a 7.05 percent increase to close out at 37,950 won ($33.63). Both companies saw their stock price increase over two consecutive days as well. SM Entertainment also saw a 6.30 percent increase to close out at 43,850 won ($38.86). All three stocks also showed a high amount of roll-over from foreign and institutional investors.
JYP saw their highest profits in the second quarter of this year (9.1 billion won) and posted an “earning surprise” of 20 percent for three consecutive quarters (an earnings surprise is when a company’s profits are above analysts’ expectations). The company’s economic health this quarter is attributed to the comebacks of TWICE and DAY6, GOT7’s world tour, and TWICE’s Asian tour. It is expected that JYP’s profits will rise to 10.4 billion won in the third quarter of this year if TWICE’s Japan showcase is factored in. With an operating margin of 28.7 percent, JYP’s rate of cost to selling price was 51.7 percent in the second quarter, their highest in history.
JYP is also planning to debut a new group in China called BOY STORY in the second half of this year, while GOT7 recently announced a comeback. Hana Financial Investment, expecting that JYP will continue their “earning surprise” streak into next year, have raised their target goals for the company by 9 percent.
Analysts reported that YG Entertainment’s second quarter was relatively good considering BIGBANG’s hiatus (due to mandatory military service), though they cautioned that the economic effects of the hiatus would not truly be felt in the second quarter. On August 10, the company announced that they’d seen a 68 percent drop in their business profits in the second quarter (compared to the second quarter of last year), with an 83 percent drop in concert revenues, 36 percent drop in commercial revenues, 14 percent drop in royalties, and 48 percent drop in album revenues. However, this was in line with market expectations, considering the anticipated risks.
Nevertheless, YG’s subsidiary YG PLUS successfully went in the black after 14 quarters, turning a profit of 100 million won. BLACKPINK has seen a lot of success on domestic music charts, which will likely benefit the company’s domestic and overseas music development. Their music sales in the second quarter had increased 15 percent from the last quarter, and securities analysts expect the company’s profits to easily surpass 50 billion won by 2020.
SM, whose market capitalization is close to 1 trillion won, also recorded a positive performance. Their revenue increased 84 percent from the same time last year at 124.4 billion won, their largest quarterly record. As sales on global platforms such as YouTube and Spotify increased, overseas music sales jumped about 70 percent from the same time last year.
In the market, it is expected that SM will pass 50 billion won in operating profit this year. Comebacks in the second half of 2018 include Red Velvet, Girls’ Generation’s new subunit, EXO, and NCT, with TVXQ promoting in Japan. Moreover, SM C&C, which recorded a deficit of 300 million won this quarter, is expected to achieve a turnaround in the second half due to increased advertisement orders and recovery in the Chinese market, which had been suppressed by the law banning Korean cultural content in China.