Brokers’ take: KGI initiates ‘outperform’ on Unusual, sees it on the ‘cusp of a recovery’ 

KGI Securities has initiated coverage on Unusual Limited : 1D1 0% with an “outperform” recommendation and a target price of S$0.192, as it believes that the concert promoter is poised to benefit from the growing demand for live entertainment services. 

The target price implies a price-to-earnings ratio (P/E) of 38.1 times for FY2023, which KGI analyst Simeon Ang acknowledges “might appear rich” but also believes it is “justified” due to Unusual’s expected return to profitability. 

The target price also implies a P/E ratio of 18.4 times for FY2024, which Ang deems “inexpensive” and is based on the “recovering fundamentals” of the events-production unit of mm2 Asia.   

In his report, Ang expects Unusual to be back in the black by FY2023, forecasting FY2023 profit after tax and minority interests (Patmi) to rise to S$5.2million - a “stunning turnaround” from a loss of S$4.2 million in FY2022. 

Additionally, the analyst expects revenue to jump to S$45.6 million in FY2023 from S$3.6 million in FY2022.

Noting an “explosion” of interest in concerts in the second quarter of 2022 across key markets such as Singapore, Malaysia and Hong Kong with pandemic curbs lifting, Ang is bullish on the Asian live entertainment scene. 

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“Unusual is awakening to an environment where fan demand for live entertainment is reviving, and artistes are looking to capitalise on a resurgent discretionary spend,” he added. 

Ang is of the view that Unusual is the “best-in-class play on (the) Singapore Exchange when it comes to live entertainment” and expects Unusual to produce and promote at least 12 live music events in FY2023, which he predicts will eventually recover to pre-pandemic levels by FY2024. 

Additionally, Ang notes that Unusual has already secured 27.3 per cent of his FY2023 ticket sales forecasts, which places the company “in good stead” to achieve and outperform his estimates. 

Going forward, Ang projects revenue to grow 127.3 per cent compound annual growth rate (CAGR) from FY2022 to FY2026 to reach S$95.9 million, and total ticket sales to rise 23.3 per cent CAGR - from 260,500 in FY2023 to 488,750 by FY2026.

On break-even costs, Ang expects core earnings before interest and tax (Ebit) margins to turn around in FY2023 to 14.9 per cent and attain pre-pandemic levels of 21.7 per cent by FY2024. 

Shares of Unusual ended Monday trading S$0.019 or 14 per cent higher at S$0.154.