South Korea market see big changes

Entertainment stocks take a beating

SEOUL South Korean entertainment stocks are showing strong volatility, as a rush of market listings in 2005 and 2006 have failed to deliver as expected.

Highest-profile development of recent months is production/distribution house MK Pictures’ sale of management rights to a consortium headed by regional broadcaster Kang Won Networks in early July. However, the number of smaller companies changing hands continues to grow.

Many of the entertainment firms currently listed on Korea’s KOSDAQ or KXE exchanges went public through reverse acquisitions and backdoor listings in 2005 and 2006, when an Asia-wide burst of interest in Korean pop culture infected investors as well as ordinary fans. However, few companies have been able to deliver the steady growth and profit margins demanded by the market, and stock prices have taken a beating as a result.

The list of entertainment-related firms that have changed hands this year include Tube Pictures, which produced Weinstein Co. pickup “No Mercy for the Rude” in 2006. After giving up film production, the firm transferred management rights to a resource development firm and this month changed its name to Petroholdings Corp.

In February, production house Popcorn Films sold management rights to listed entertainment firm Fantom Entertainment and changed its name to Doughnuts Media. In March, UBdigm, which produced the 2006 melodrama “Fly High,” transferred management rights to shareholder Korea Technology Investment Corp.

Meanwhile, on July 16, Lee Ho-yeon, prexy of talent/TV production house DSP Entertainment, sold his leading 20.69% share of the company with management rights to tech firm Red Korea for $12.9 million.

On the same day, music and DVD firm HB Entertainment sold 10.33% of its stock together with management rights to rival homevideo company Bear Entertainment for $8.4 million. Many currently listed firms are also experiencing trouble, in a year when the film and TV industries have struggled. Talent/content conglomerate Fantom Entertainment was no less than $44.7 million in the red last year, with a further $1.9 million loss reported in the first quarter of 2007. Talent/production house iHQ also reported losses of $2.9 million for the first quarter.

Only a few entertainment-related stocks have managed to avoid the downward trend. Major studio Mediaplex has seen its stock rise from 15,800 won on May 16 to 31,550 won by July 16 on rumors of a now-confirmed sale of its third-ranked exhibition chain, Megabox.

Shares in market-leading exhibitor CJ CGV, meanwhile, have remained largely steady this year after steep losses in 2006.

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