Brokers' take: RHB downgrades UnUsUaL to 'neutral', says recovery not yet imminent

RHB Research has downgraded UnUsUaL Limited 1D1 : 1D1 0%to "neutral" with a lower target price of S$0.14 from its previous "buy" rating and S$0.16 target, as it believes a recovery is not yet imminent for the concert promoter.

This come as the research house now expects mass events to only resume in either Q4 2021 or Q1 2022 due to the emergence of the Covid-19 Delta variant, dampening RHB's former expectations for such events to recommence in H1 this year.

"Although the worst is over for UnUsUaL, we still think concerts and events will likely not resume so soon… We only expect events to resume from 1Q22 onwards, if the pandemic remains controlled with no new variants thwarting the efficacy of existing vaccines," said analyst Jarick Seet in a report on Wednesday.

Noting a severe financial impact in FY2021 from Covid-19, he thinks the following fiscal year will remain a weak one for UnUsUaL despite a slight recovery.

This is due to an expected absence of large-sized concerts - which served as a main revenue contributor in past years - to be held in Singapore in the near-term, although Mr Seet highlighted a possibility of concerts resuming earlier in other parts of the world, such as in China.

"We cut our stock rating to 'neutral', pending updates and confirmation of the company's future pipeline of concerts and events," he said.

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Mr Seet nonetheless remains positive on the group's move to produce live virtual concerts with Singapore-based music production company JFJ Productions through a recent joint venture (JV) and thinks this could serve as a new revenue stream for UnUsUaL.

While the analyst estimates the JV's inaugural virtual concert which took place on July 10 to contribute about S$1-2 million in profits for the company, he thinks it may not be enough to bring it back to profitability in FY2022.

He added: "Management is working hard to maintain close relationships with its partners, artistes and managers, and will likely continue to produce and present more live virtual concerts in the future, in our view."

As at 10.33am, shares of UnUsUaL were unchanged at 13.8 Singapore cents.

READ MORE: 

• Unusual Limited to record net loss for FY2021 on pandemic impact

• UnUsUaL Limited implements pay cut and other moves to conserve cash reserves amid virus crisis

• Covid-19 pushes UnUsUaL Ltd's net profit for FY2020 down 52%