A detailed explanation of Erdong Pictures' listing in Hong Kong: Hong Kong stocks have become a "must-select channel", and listing is the "only option"

BonaPictures HongKongstocks

taimeiti· 2019-12-03 04:22:12

Image source @ unsplash

文 | 跃 幕Movie, author | Pang Hongbo

Pull capital back into view again.

At the end of each year, there is a high degree of interest in the review of the broader market and the review of the company's capital. In the past two years, capital seems to have become a sensitive word due to the decline of the entire industry.

On November 29, Erdong Pictures submitted an IPO prospectus to the Hong Kong Stock Exchange. The uniqueness of this emerging company has become a "benchmark" for the entire market in the past two years.

Instead of showing its own laymanship at the beginning, it accumulated a lot of resources by participating in a large number of Hong Kong films. Unlike many "rookie companies" who have participated in the investment and experience, Erdong did not quickly jump into the "sweet trap" of the main investment. Instead, it first laid out the relevant supporting industry chain, from theater management to artist brokerage. In overseas markets, when the supporting industry chain is basically completed, the Series A financing will be completed quickly and the pace of listing will be accelerated.

From this point, Erdong Pictures still has an "unusual path". But in reality, Erdong Pictures is still on the capital road that all content companies have to go.

For any content start-up company, it will eventually need to face the challenge of capital. Although the entire industry is in the cold winter, and despite the "lock-up" of the film and television company's listing options, seeking capital help is always an essential link.

The current choice of Erdong Pictures proves this.

It is worth noting that Eardong Pictures also had a bumpy road to go public. I had hoped to backdoor A shares. But after Haibao Biological changed its name to Dalian Erdong, the road to listing was not satisfactory. As Dalian Erdong was renamed as Haohan Education, and its main business was changed, it was announced that this backdoor listing would eventually cease.

The main body of the IPO in Hong Kong is Erdong Film Group, which includes Beijing Erdong. It has no relationship with Pinjin Holdings and Haohan Education (formerly known as Dalian Erdong).

Why Hong Kong stocks?

The only viable "capital channel".

For film and television companies, their own capital attributes are relatively fragile. Low valuations, unattractive net profits, and valuations that do not see long-term growth potential constitute the "three big mountains" of film companies' capital operations.

Even with such "congenital shortcomings", it is still very difficult for film and television companies to borrow capital. Affected by regulatory, tax and other factors in China in the past two years, the hope of film and television companies for landing A shares has basically been locked. Bona Films has been queuing for many years after the privatization was completed, and the market performance of Bona Films in the past two years is undoubtedly the first level of the film and television industry. Coupled with the "main theme" attribute of Bona Films' own work, if Bona Films has not yet completed the meeting, where is the hope for other film and television companies?

Similarly, Bona Pictures was listed on US stocks before returning to A-shares. However, the reason why Bona Films returned to A is to prevent domestic film and television companies from going to the United States. The "unsolved mystery" that once plagued Dong will also perplex every film and television company owner who is eager to go public in the United States.

The only difference is that Yu Donghui A saw the vigorous development of the domestic film and television capital market. Then, if you go to the United States at this time, whether it is inside or outside, the risk will increase several times.

Thus, neither A-shares nor US-shares can be the choice of a film and television company. In contrast, Hong Kong stocks have become the only viable "capital channel".

Earlier, Emperor and Cat's Eye led a round A round of financing for Erdong Pictures. Ear East Pictures has also maintained close ties with the Hong Kong Film Company in the past few years. Relatively speaking, the risk of choosing a Hong Kong stock market is not high.

Moreover, Hong Kong stocks have indeed become a popular choice this year. Not to mention Ali's return to Hong Kong stocks, Cat's Eye also successfully slammed the gong on New Year's Eve, and then Litian Pictures also chose to go to Hong Kong for an IPO. However, it should also be noted that, as a new-type film and television giant in the Mainland, the valuation before the listing reached 20 billion, and the market value on the first day of listing reached 16 billion Hong Kong dollars. Today, the market value of cats entertainment is 12.73 billion Hong Kong dollars.

So, for film and television companies in the Mainland, whether going to Hong Kong can achieve the "primary intention" of capital itself is quite uncertain. The basic point is that the inland film and television companies going to Hong Kong this year actually have some weak links in the overall "capital story", and how much these weak links affect their capital is actually difficult to complete in the early stage. evaluation of.

But for Erdong Pictures, the early "endorsement" of cooperation with many established companies in Hong Kong will clear some obstacles.

Erdong ’s "Hong Kong film" strategy

Erdong's listing in Hong Kong may not be a temporary intention.

In fact, after the backdoor "Dalian Erdong" went public, the listing of Erdong Pictures in Hong Kong may already be a very clear runway. On the one hand, the particularity of the Hong Kong stock market in this environment, on the other hand, lies in its own "Hong Kong" gene.

Since 2016, participating in "Breakthrough" and "The Apostle", Erdong Pictures has basically covered all high-quality Hong Kong films in recent years. For a time, participating in Hong Kong films has become a "microcosm" of the external impression of Erdong Film. By 2018, although the proportion of Hong Kong films in the more than 10 works participated by Erdong Film has declined, it still accounts for nearly half proportion.

The layout on Hong Kong films also allows Erdong to maintain a very close cooperative relationship with Emperor, Sun Entertainment, Star Dynasty, Tianma, and Shaw. This group of companies is no longer just half of the Hong Kong film and television industry, especially the "Go North" strategy of a large number of Hong Kong companies, so that these companies have a greater say in the Hong Kong film industry.

It is also because of its outstanding performance in "Hong Kong Films" that Eardong has gradually established cooperative links with mainland companies such as Wanda, Bona, Light, and Cat Eye. In the past two years, whether it is "Red Sea Action", "The Richest Man in Xihong City", "I and My Motherland" have appeared in Erdong Pictures.

In addition to the good impression brought to Hong Kong by participating in Hong Kong films, it helps it to better establish a cooperative relationship with mainland film and television companies. In fact, for Erdong Pictures itself, It is precisely necessary to reduce the impression brought by participating in Hong Kong films.

Today, Hong Kong films have also undergone a certain degree of policy adjustments. The "restriction on joining" of mainland elements has been reduced, which means that future cooperation between mainland capital and Hong Kong film and television companies It will be smoother, which also requires Eardong Pictures to have a more solid voice in the industry.

In addition, for Erdong Pictures, participating in the Hong Kong film entry is more like a "knocker", and more importantly, the subsequent content layout. In fact, since 2018, Erdong Pictures has shown slight changes in its investment strategy. Many works have been promoted from joint producers to producers on the company list.

And Er Fan Pictures President Yang Fan said that in 2019, he will change the strategy of participating in investment, strive for more project control, and hope to account for 80% of the total, while the remaining 20 % Is to increase industry exposure through participation in head projects. In the first half of this year, "Teacher Good", which became a black box office film, was one of the main producers. The "Ballet 2nd Party 2" and the "Eight and Half Heroes" to be released are both The "pioneer" of Erdongying's owner-controlled projects in the future

From participation to main investment, it is the only way for most content companies. Behind these two are actually very different market approaches. Erdong Film has not rushed to the main investment in the first four years, but with the adjustment of the industrial structure of Hong Kong films and the maturity of resource accumulation, the main investment is an inevitable.

From the financial report data released in the prospectus, in the past 2016, 2017, 2018 and the first half of 2019, Eardong Film's operating income was 44 million yuan and 175 million yuan, respectively. , 380 million yuan and 436 million yuan; the corresponding net profit was 4.841 million yuan, 29.948 million yuan, 57.328 million yuan and 49.12 million yuan.

From the direct digital feedback, a large number of participating "ceilings" are emerging. IPO seeking more abundant funds, secondary activation of existing industry resources to seek control of the main investment has become the choice that Erdong Pictures has to do

Erdong "Imagine The joys and worries of "force"

In fact, pure project funding gap may not require you to go to Hong Kong to list. And the small amount of Series A financing also determines that Erdong not only focuses on the content itself.

The extension of the downstream industry chain and the expansion of overseas markets may require richer financial support from Erdong Pictures. According to the prospectus, as of the end of 2019, there are 12 movie studios to be built and operated by Erdong Pictures, located in Beijing, Shanghai, Suzhou, Xi'an, Hefei, Changshu, Yancheng and other places. It can be seen that the first- and second-tier cities are clearly a focus of Erdong Studios, and the first- and second-tier cities are mostly located in commercial complexes with a large number of people. For example, Beijing ’s World Trade Skyline and Blue Harbor each have an ear studio.

Such a location determines the investment of Erdong Film. In addition, Erdong Cinema also focuses on the high-end strategy of "themed theater + VR cinema".

The total number of domestic screens now exceeds 65,000. Moreover, due to the reduction in the number of projects produced by the film and television winter, the oversupply of theaters in practically effective areas has caused theaters to experience an industry shock in the second half of last year.

And this year, with Bona and Chinese culture getting a cinema license, theater forging has begun to enter the reshuffle period. For Erdong Pictures, if Erdong Pictures wants to mature to seize the market space in the more saturated first and second tiers, it will inevitably need very different operating strategies. Starting from the high-end movie viewing experience of the VR movie theater for the incision, there is obviously room for future growth, but only if Eardong Pictures has sufficient funds to supply blood.

From the background of the entire market, this year the theater's "theater sense" has been re-emphasized. Whether it is a special movie theater or a high-end movie city, it has entered the "acceleration". The audience ’s emphasis on a high-quality movie viewing experience will not weaken too significantly in the next few years without any surprises. How to win the "high-end market" is the same as strategy + capital.

In addition, Eartone Films and Hollywood Gersh Agency established a joint venture in the Mainland this year. They also cooperated with Starlight Culture to jointly invest in the production of 10 top Hollywood directors signed by Starlight. Movie works. At the conference site, 12 projects were announced including Wen Ziren's "Sentinel", Sam Raimi's "Pleasure of Self", "Magic Stone and Shell", Zhu Haowei's "Soul Dance Ji", and Sylvester Stallone's "Special Forces".

For the expansion of overseas markets, Erdong Pictures will definitely need to spend a "groping period". However, the "maturity" of Erdong Pictures is actually higher than that of most innovators in the mainland. This may have some relationship with Erdong's long-term cooperation with Hong Kong companies with a higher level of industrialization. Yang Fan said before: "For film companies, the box office battle is actually a global competition for professional film talent. "

To sum up, Erdong's future strategy will necessarily require the help of capital, but in the case of not wanting to use equity financing and large companies to play equity games, going public has become the "only option".

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