Image provided by Mentor Finance

Investment Highlights:

  1. CPOP’s strategic change might be manifested in its bid-winning for Migu Quanquan’s promotion project of Hanfu.
  2. This company specializing in the cultural operation of hip-hop believes that it may be overlooked in the market despite its financial performance. 

Recently, CPOP (Pop Culture Group Co., Ltd) secured the bid for the Hanfu Cultural Festival of Migu Comic Co., Ltd. With the bid, CPOP will provide bespoke services to popularize the Hanfu culture for Migu Comic’s platform, Migu Quanquan, including online and offline special event planning and event execution.

The company runs operations of hip-hop culture, whose listing this June was in the spotlight, a surge of up to 1200% above the offering price made the stock memorable to many market investors. However, the poor performance of China Concept Stock since 2021 has dragged the share price below its offering price of $6.

Hanfu, the traditional style of clothing worn by the Han people in China, has gained popularity among young consumers in China in recent years. According to iiMedia Research, the sales of Hanfu skyrocketed from 190 million Yuan (about $29.7 million) in 2015 to 6.36 billion Yuan (about $1 billion) in 2020.

China-Chic, the pop culture with Chinese elements and craftsmanship is gradually become mainstream in China, rapidly permeating industries such as entertainment and consumption. Li Ning, Anta, and other forerunners of the industry are actively making adjustments to their product mix toward China-Chic.

Against the backdrop of such a hip-hop trend in China, CPOP readjusted its structure on November 15, focusing its layout on three major businesses — POPIDEA, POPSPORTS, and POPLIVE. POPIDEA is aimed at making the client’s brand younger and more popular. This department is expected to take charge of the cooperation of Migu Comic — integrating online and offline content and platform resources to amplify the brand effect, with strategy leading the way.

Green Xia, the founder of Solestage, noted in a PwC report that the China-Chic culture soars in popularity in China, and the pride of young Chinese generations aroused by the country’s rising makes the related industry chain in China a very promising ground for development. CPOP may want to elbow its way into the market by virtue of its experience in China’s hip-hop circle.

“Upon the completion of the effective integration of our resources with those of third parties in the industry by upgrading our organizational structure, we are looking forward to bringing success to all stakeholders. And with the vision of becoming a world-class producer of hip-hop culture content, CPOP will continue to create quality content loved by young people such as sports and entertainment,” said Mr. Huang Zhuoqin, Chairman and CEO of CPOP.

The hip-hop culture was introduced to China in the 1990s, with a slow spreading and small audience for a long time. The program ‘THE RAP OF CHINA’ was broadcasted in June 2017, creating a stir and rapidly popularizing hip-hop. In the past few years, China’s hip-hop market has been continuously expanding — developing from sub-culture to mainstream pop culture. An increasing number of youngsters falling in love with hip-hop music and echoing spirits such as equality and freedom.

As of 2021, hip-hop and R&B music, though not as prevailing as pop music, has won their position in China’s music market. The hip-hop culture, especially street dance, which will make its debut at the 2022 Asian Games and the 2024 Olympics as an official event, may draw more attention in China. CPOP, in its layout of POPSPORTS, emphasizes its developmental plan of street dance bases.

The expansion of the hip-hop industry has driven the company’s performance upward. According to its latest financial report, CPOP’s revenue witnessed a year-on-year rise of 63% to $25.5 million, including $15 million in IP content, a 96% jump from the figure of 7.6 million in 2020.

Organizing events is the company’s primary business — dance competitions, musical festivals and promotional parties serve as the major income resources of the company, with 35 dance competitions, 29 musical festivals, and 4 online hip-hop programs held from June 2020 to June 2021.

The company saw a marked increase in cost spending, 64% up from the fiscal year ended June 30, 2020, because it hosted 22% more events that year. The gain is directly proportional to the increase in earnings and net profits. Up to the fiscal year ended June 30, 2021, CPOP secured a net income of $4.3 million, 63% more than that of the fiscal year of 2020.

The company’s capital turnover, however, is worrisome. In the fiscal year of 2021, CPOP’s liquid assets totaled $32.41 million, among which receivables reached $25.53 million, almost the full year’s revenue. CPOP’s turnover cycles of entity operations in China lasted for 286 and 291 days respectively of the 2020 and 2021 fiscal year ended June 30.

The company asserts that the funds raised from the listing effectively solved its capital issue. It received $34.8 million in proceeds from the IPOs. On October 31, 2020 it had $33.4 million in its bank account, which it believes is sufficient for its operations.

Despite the highlights in its performance and expectations, CPOP claims that its price seems to have been “overlooked”. Up to now, no analysts have made ratings and forecasts for the company. There is a gap between CPOP’s P/B ratio, currently 2.67, and that of Endeavor Group Holdings, Inc. (EDR.N), a giant with similar business scope. The company believes that the dramatic fluctuations in the early days of the IPO have distanced CPOP fairly far away from being ‘discovered’.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. The content was purely for informational purposes only and not intended to be investing advice.

© 2021 Benzinga does not provide investment advice. All rights reserved.

Previous articleCrypto-exchange Gemini Expands Services To Colombia
Next articleMinority Students Encouraged to Apply for Dominion Energy Educational Equity Scholarship