Hong Kong Exchanges and Clearing disclosed the listing information of Fenghua Qiushi Group Holdings Co., Ltd. on January 22nd, Fenghua Qiushi plans to land in the Hong Kong stock market, and the exclusive sponsor is the same person financing Co., Ltd.
As a music and entertainment service provider that has been operating for more than ten years, the biggest highlight of Qiuzhou lies in the management of many well-known artists and bands, such as Lu Han, Wei Daxun, Black Panther and so on.
It should be noted, however, that Fenghua Qiushi is more concentrated in both suppliers and customers. For example, the company is very dependent on Lu Han, and the purchase cost of Lu Han Group reached 46.1% in 2019.
Net profit increases year after year
Fenghua Qiushi is a music entertainment service provider that has been operating in China for more than 10 years, focusing on music copyright licensing and music recording business, supplemented by concert hosting and production and artist management.
According to a report by third-party consulting firm Zhenshi Consulting, Fenghua Qiu ranks 18th among music record companies in terms of revenue from music copyright licenses and music recording in 2019, with a market share of about 0.6%. Among the music record companies headquartered in China, the company ranks seventh, with a market share of about 1.5%.
The company can be traced back to Beijing Fenghua, which was founded in 2010, when it hosted two rock concerts "in full bloom" in Beijing and Shanghai, and established its original performance brand "in full bloom". Subsequently, the company released Wang Feng's solo album "nothing to ask for" in 2011, entered into an exclusive full-domain contract with rock band Black Panther in 2012, signed an exclusive music contract with Lu Han and released his debut album "Reloaded" in 2015, and then released other Lu Han albums and hosted his concerts.
According to the listing materials, the founder of the company is Li Hui, who serves as the chairman and executive director of the company. In addition, Song Ke is also a glamorous independent non-executive director.
In fiscal year 2018, fiscal year 2019 and nine months in 2020, Fenghua earned RMB 100m, RMB 55.61 million and RMB 58.5 million respectively, while net profit in the same period was RMB 18.6 million, RMB 18.8 million and RMB 45 million respectively.
The purpose of the HKEx financing will be used to: the cost of producing albums for the company's current and future artists, including lyrics, music management, recording, mixing and master production, photo and MV production and post-production, marketing and promotion costs; purchasing suitable music works with commercial potential in the market To provide funds for the concerts the company plans to host in fiscal years 2021 and 2022 to consolidate the company's market position in the concert industry; it will be used to provide music production services and expand the company's music production and copyright license management services. and seek cooperation with well-known music or performing artists, and so on.
Both customers and suppliers are highly concentrated.
For film and television, music, entertainment enterprises, its well-known artists are particularly important. According to the latest data, Fenghua Qiushi manages 10 artists and 10 trainee artists, including Black Panther (since 2012), Lu Han (since 2015), Hao Yun (since 2016) and Zhao Zhao (since 2016).
Fenghua Qiushi is mainly engaged in three major business sectors: first, music copyright licensing and music recording, which the company regards as their main business segment; second, concert hosting and production; and third, artist management. The company's music copyright licensing and music recording business generates revenue mainly from two sources: first, royalties collected from licensed music works (including singles, digital albums, physical albums, videos and music library selections); and second, production fees collected from the provision of music production services.
It should be noted that Fenghua Qiushi relies heavily on a major customer. In fiscal year 2018, fiscal year 2019 and nine months in 2020, the total income from the company's top five customers was about 36 million yuan, 48 million yuan and 56.4 million yuan respectively, accounting for 35.9%, 86.3% and 96.4% of the company's total revenue, respectively. During the above period, the revenue generated by the largest customers accounted for about 26.2%, 78.6% and 70.7% of the company's total revenue, respectively. The client is a parent company listed on the New York Stock Exchange.
In addition, in addition to the concentration of customers, Fenghua Qiushi's dependence on Lu Han is also very high. The company's suppliers mainly include music copyright owners, managed music artists, other artists and actors, music creators, music production companies, concert planning and production service companies, technical staff and venue operators. Of all the company's top five suppliers in the past, the total procurement costs paid to Lu Han Group accounted for about 35.8%, 46.1% and 22.8% of the total procurement costs in fiscal year 2018, fiscal year 2019 and nine months in 2020, respectively.
And Feng Huaqiu actually listed in the risk factors also said: "Mr. Lu Han is a hot artist in China's music and entertainment industry, but we can not guarantee that this will always be the case during the contract period." Nor can we guarantee that Mr. Lu Han will continue to cooperate with us or at a reasonable price after the expiration of our contract. If we fail to renew our contract with Mr. Lu Han, our music may be adversely affected, which will affect our customers' willingness to cooperate with us in the future, which in turn will have a significant adverse impact on our business, operating results and financial position. "