HONG KONG/LONDON (Reuters Breakingviews) – Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
– Big Hit Entertainment
– Melrose Industries
CHART-TOPPER. Online concerts are now a big thing, or so much so that Big Hit Entertainment, the South Korean management label behind popular K-pop boy-band BTS, is pushing on with its initial public offering, setting a price range aiming to raise as much as 962.6 billion won, or about $811 million. Earnings have been encouraging too: Big Hit last month managed to eke out a half-year operating profit supported by online events and merchandise sales.
Although the seven-member BTS were forced to cancel a tour because of the Covid-19 pandemic, they managed to draw some 756,000 people globally to a paid online concert in June, according to Reuters. Their newest release “Dynamite”, the first all-English language single from the group, has smashed https://www.guinnessworldrecords.com/news/2020/9/bts-smash-youtube-viewing-records-once-again-with-single-dynamite-628998 Guinness World Records titles, becoming the first Korean act https://www.billboard.com/articles/columns/k-town/9444188/bts-dynamite-interview-number-1-billboard-hot-100-exclusive to debut at No. 1 on the U.S. Billboard Hot 100 singles chart. The music, it seems, will go on. (By Sharon Lam)
CONTINENTAL CATCH-UP. France’s Capgemini, the 20 billion euro IT consultancy, is having a better pandemic than investors feared. Chief Executive Aiman Ezzat on Thursday reinstated https://investors.capgemini.com/en/publication/2020-h1-results 2020 financial targets, having dropped them earlier this year. Free cash flow should surpass 900 million euros – less than previously hoped, but hardly a disaster. A 3% share-price bump means Ezzat’s company is now up 29% since early June, beating the CAC 40 index and U.S. peer Accenture. As companies shift towards flexible working, Capgemini’s services should be in demand.
In valuation terms, however, there’s work to be done. Capgemini is worth 19 times 2020 earnings, using Refinitiv Smart Estimates, a 43% discount to Accenture. For much of 2018 and 2019, the two traded in lockstep. Ezzat can close the gap by wringing synergies from his recent acquisition of peer Altran Technologies. At least he finally has a little momentum. (By Liam Proud)
COOL HEADS. Melrose Industries had set the bar reasonably low. The UK industrial buyout specialist’s newly announced 90% collapse in operating profits in the six months ending June https://www.melroseplc.net/media/announcements/2020/2020-half-year-results had already prompted CEO Simon Peckham to pledge job and cost cuts in July. Throw in a few encouraging words about trading at the “higher end” of expectations in its automotive and air conditioning business, and the company’s shares jumped 10% in early trading.
Still, ideally Melrose’s net debt would be a little lower than its end-June level of 3.4 times EBITDA. Selling air conditioning unit Nortek, which has had a reasonable crisis amid an expansion of its online unit and demand from data centres for its cooling systems, would help. Nortek has previously been valued at 2 billion pounds, or over a third of the company’s market value, according to Investec analysts. If Peckham’s optimism pans out, it should be easier to flog. (By Aimee Donnellan)
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