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[Apha Biz=(Chicago) Reporter Paul Lee] SM Entertainment, which recorded a "surprise performance" in the second quarter, has soared more than 30% in a month, restoring its status as the oldest among the four major entertainment companies.
After Kakao acquired SM Entertainment, it is analyzed that the effect of moving out of the shadow of founder Lee Soo-man and switching to a multi-production system is becoming visible. In addition, synergy with Kakao is also drawing attention in the distribution of SM Entertainment's music sources and overseas expansion.
According to the Korea Exchange on the 7th, SM Entertainment closed at 139,000 won, up 0.9% from the previous trading day. SM Entertainment's stock price began to gain momentum in July ahead of the second-quarter earnings season, soaring 30.1%. It rose 3.5% over the same period, far exceeding the yield of YG Entertainment (122870) (4.7%), a competitor in the same industry as KOSDAQ. Hive (352820) and JYP Entertainment (035900) saw their stock prices fall by 2.5% and 3.4%.
SM Entertainment's second-quarter earnings were the driving force behind the rise in stock prices. SM Entertainment recorded consolidated sales of 239.8 billion won and operating profit of 35.7 billion won in the second quarter, up 84% from the same period last year. Stock market estimates (31.2 billion won) also exceeded 14%. As expectations for earnings improvement spread, institutional investors boosted their stock prices with KRW 76.2 billion flowing in since July.
The securities industry estimates that Kakao's acquisition of SM Entertainment is taking place in earnest. SM Entertainment is implementing "SM 3.0," which sets up a production system centered on each artist while welcoming Kakao as a new owner, and its performance has already become visible.
The securities industry predicts that direct cooperation with Kakao is also a factor in increasing SM Entertainment's presence in the industry in the future. Following SM Entertainment and Kakao Entertainment's integration of their North American subsidiaries on the 1st, expectations are growing that they can create synergy in music distribution and overseas businesses. Kakao is also glad to see SM Entertainment's contribution to its performance. Kakao surpassed 2 trillion won in quarterly sales for the first time in history thanks to the effect of integrating SM Entertainment in the second quarter. In addition, Kakao posted operating profit of 113.5 billion won, and 12.8 billion won, which lost 22.9 billion won in acquisition price distribution (PPA), was reflected in SM Entertainment-oriented profits, contributing to the defense of profitability.
The securities industry has been raising its eye level by raising SM Entertainment's target stock price one after another since the announcement of its second-quarter earnings. All 11 securities companies that published SM Entertainment Analysis Report this month raised the target price of SM Entertainment.
AlphaBIZ 김지선(stockmk2020@alphabiz.co.kr)
