(Yonhap Feature) Entertainment stocks shine amid K-pop boom
By Lee Minji
SEOUL, Nov. 21 (Yonhap) -- As South Korean pop idol groups make a splash on stages across Asia and Europe, shares of local talent agencies are on a roll, luring both investors and companies wishing to seize a golden opportunity to jump on the "Korean pop" (K-pop) bandwagon.
The power of "hallyu", or the Korean wave, in the music industry has done wonders for the local entertainment industry. The combined net income of the country's three major music entertainment agencies -- SM Entertainment Co., JYP Entertainment Corp. and YG Entertainment Co. -- grew more than eight-fold from a year earlier to 32.5 billion won (US$28.6 million) in 2010.
Their revenue hit 152.9 billion won last year and is forecast to trend higher this year on the back of increased profits from royalties and overseas concerts.
SM, the pop music powerhouse with a lucrative roster including Girls' Generation, Super Junior and SHINee, is the industry front-runner. Since making its debut on the secondary KOSDAQ bourse more than a decade ago in 2000, the leading entertainment agency now trades at 53,600 won per share and has grown nearly three-fold from 17,900 won in the beginning of the year.
The blue chip saw its share price soar by a daily limit of 15 percent after a successful Paris tour, in which 14,000 European fans flocked to see the SM clan's two-day concert. Some 300 fans even did a group dance in front of the Louvre, demanding tickets to the show after they sold out in 15 minutes.
JYP, the brainchild of singer-songwriter Park Jin-young, is another KOSDAQ favorite.
Shares of the pop music agency, which is home to girl groups Wonder Girls as well as boy bands 2AM and 2PM, more than doubled this year to 8,340 won from 3,105 won.
Loen Entertainment Inc., which offers K-pop streaming services, and Keyeast Co., whose major shareholder is Bae Yong-joon, the hero of the wildly popular drama "Winter Sonata," are also some other entertainment stocks that have stepped into the limelight.
"It's very positive how talent agencies are aggressively tapping into overseas markets. Efforts to collaborate with local agencies are under way, which will be engines to keep hallyu going," said Kim Shi-woo, an entertainment and media analyst at Korea Investment & Securities Co.
"They have big potential, especially in Japan. Profit is virtually guaranteed," Kim said.
European fans cheer for Girls' Generation at SM Entertainment Co.'s two-day concert in Paris in June. (Yonhap file photo)
While listed talent agencies and companies are enjoying their heydays, YG, one of the country's top three pop music agencies, is preparing to go public on Wednesday.
YG, established by Yang Hyun-suk, a member of the legendary '90s K-pop band "Seo Taiji and Boys," plans to use the proceeds from the listing to further extend its stardom in Asia.
"YG aims to improve its strengths. There are plans to launch new subsidiaries in China and the surrounding region," YG Chief Executive Officer Yang Min-suk said in a press conference earlier this month.
Yang also emphasized the market's interest in South Korean talent agencies' trainee management system, adding YG has plans to export this system via an academy.
"The content market in South Korea is rapidly growing and eyeing new opportunities. If the first-generation Korean wave started with TV series 10 years ago, pop music is leading the trend now," Yang said.
Market watchers, however, warn that the outlook is not all shine for talent agencies. There have been doubts over the industry's sustainability and anti-hallyu movements have emerged recently in Japan.
Since August, a number of Japanese nationalist groups have held protests demanding that broadcasting stations there slash airtime for Korean TV series and entertainment. Others raised doubts on whether the whole entertainment industry is benefiting from the K-pop craze.
"The economic impact of anti-hallyu may be more trivial than expected. But potential investors should always bear in mind that only a minority of companies are actually earning money from the K-pop wave," said Kim Chang-kwon of Daewoo Securities Co.
"After all, overseas debuts aren't always successful," he said.
Analysts, meanwhile, point out that a tarnished reputation or an abrupt scandal can easily mar earnings and cause share prices to plummet.
"The bigger the star power, the bigger the fallout from an unexpected event will be. It's inevitable," said Kim of Korea Investment.
Artists from YG Entertainment Co. pose at a launching ceremony of a joint venture with a Japanese talent agency. YG aims to strengthen its footing in Asia using the funds raised from its planned IPO. (Yonhap file photo)
YG, for instance, faced a hurdle when G-Dragon, one of its flagship artists, muddied his image with a drug scandal.
The agency released a statement upon the incident -- in which the rapper said he accidentally smoked marijuana, which is highly illegal in Korea -- and set up a management team to prevent such mishaps. But nonetheless, YG scaled back its prospective IPO price band by some 10 percent, citing the scandal's potential impact on earnings.
Despite doubts and concerns, investors in search of high-yielding investments are eager to bank on talent agencies' shares amid a dearth of profitable investments.
YG saw its IPO price settle at 34,000 won, higher than the proposed band of 22,100-28,800 won, painting a rosy picture of its future in spite of tepid IPO market sentiment.
"K-pop is here to stay. The stars will keep changing, but the genre has clearly settled down," said Kim of Daewoo Securities.
The YG CEO agrees. "There are risks. But as much as there are risks, this industry is full of new opportunities."