May 4

Spackman Entertainment (SGX: 40E) is trading near its 52 week low, Is it a Bargain?

Recently, Spackman Entertainment has fallen close to its 52-week low, bottoming at 0.078 before its recent bounce up to close at 0.087 on 11 April 2018.

This gives it a market capitalization of $60.26 mil. The company has recently swung back into the black with its FY2017 earnings of $3.985 million.

With that, our article today seeks to answer the question: “Is Spackman going to turnaround going forward and is it a bargain at this current price of S$0.087?”

Before that, let’s dig into its corporate profile.

Spackman Entertainment Background

Spackman Entertainment Group (SGX: 40E) develops, produces, presents, and finances theatrical motion pictures in South Korea and internationally.

The company business also includes the following (summarized in own words):

  • Distribution of its films in other media forms (e.g. Cable/Broadcast TV, IPTV etc)
  • Ownership of a professional photography studio (noon pictures Co., Ltd)
  • Advertisement and advertising agency services
  • Management and promotional services for entertainers, athletes, artists, etc.
  • Production and sales of goods related to entertainment
  • Development of mobile content and online services

Chart Movement

Spackman share price

Spackman debuted its IPO at S$0.26 with no public tranche back in 2013. Looking at the chart from 2014, it has been on a decline since its listing.

The lowest price it has ever hit is 0.039 on 24 Aug 2015 (coincidentally, that was when the yuan devaluation scare happened).

More recently, as mentioned earlier, it hit its 52-week low of 0.78, around the period when fear of trade war peaked.

Observing the RSI, price weakness has caused it to hit rock-bottom (RSI of 0) for extended period of time. While this presents an opportunity to accumulate on weakness, one may still be exposing to the danger of catching a falling knife.

In my opinion, the stock is more suited for holding mid-term to long-term.

Spackman’s Financial Analysis

Spackman Financials

A quick look at the Net Income shows the company had been loss-making in between FY2014 to FY2017. It hit a net loss of ~$10m but recovered in the subsequent years.

Revenue from distribution of films and others has increased as a result of profit from production fees and investment returns in connection with MASTER as well as VOD sales for The Outlaws.

Leasing equipment business of Frame Pictures Co., Ltd has also contributed an increase of US$2.3m. However, this was partially offset by a decrease of US$2.0m from production of films due to lower percentage-of-completion for Golden Slumber and Sovereign Default for FY2017 as compared to Master in FY2016.

Recently, the company has also announced a proposed renewal of Share Buy Back mandate. Given its current price range, there may be good reasons Spackman could be a ripe target for share buy-back or insider buying.

Peer Comparison

Company Price P/B EPS P/E
Spackman Entertainment (SGX: 40E) 0.087 1.052 0.00575 15.13
mm2 Asia Ltd (SGX: 1B0) 0.485 3.188 0.02149 21.19

I’m using MM2 Asia for comparison due to the nature of the industry. In terms of P/E and P/B ratio, it is much cheaper as compared to MM2 Asia. That said, investors should also note that MM2 Asia has already established a strong foothold in the media industry supported by many veterans in the management team.

If we were to compare Spackman to STI, it also has a higher P/E when compared to STI (approximately 12x). That said, we have to consider the EPS growth rates and future growth prospects too.

Conclusion

Going forward, I believe the company has reached its turnaround point and should be seeing more profits for FY2018.

Potential catalysts going forward:

  • Share Buy-back
  • Insider Buying
  • Conclusion of the war ending between North and South Korea
  • Financial Results in the coming quarters

Potential continual cause of share price weakness:

  • Trade war fears
  • Earnings falling below expectations in the coming quarters

This guest post is done by Jieshen, blogger of www.marksman-investment-corner.blogspot.sg.

Disclaimer: The above should not be used as a decision to solicit buy/sell activity. Use all information at your own discretion and DYODD. 

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Tags

52 week low, spackman, spackman entertainment


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