The legendary capital theory under the "Jay Chou Economy" of walking GDP

After setting a record for the highest total number of audience in history in Hangzhou and Fuzhou, the "2024 Jay Chou 'Carnival' World Tour Concert" will replicate the same scenes in other cities in China. Behind this, the performance of the superstar legend (06683) may reach a new peak.

As a new retail operator, the innovation of the superstar legend lies in not only having a new retail business, but also an IP business. By empowering the new retail business through the IP business, it has formed a complete commercial ecosystem. According to the Securities Times app, the superstar legend is an investor in the 2024 Jay Chou 'Carnival' World Tour Concert, having already invested in the Fuzhou, Hangzhou, and Changsha stops. The investment amount for each concert is not more than RMB 10 million, with the right to receive 5% of the concert profits.

Based on disclosed information, Jay Chou will also hold concerts in Shenzhen, Nanjing, Malaysia, and Singapore this year, with Chengdu and Wuhan also rumored to be on the list. If all goes well, such concerts will only increase in the future, providing ample opportunities for the superstar legend to appear as an investor.

According to data from the China Performance Industry Association, the overall economic scale of the national performance market reached 73.994 billion yuan in 2023, a year-on-year increase of 29.30% compared to 2019, reaching a historical high. Jay Chou's concerts themselves also have considerable economic benefits.

For example, in Hangzhou, Jay Chou's 4 concerts attracted 200,000 indoor audience and 300,000 outdoor audience, preliminarily driving cultural and tourism consumption in Hangzhou by 1.316 billion yuan. In Fuzhou, the concert attracted 250,000 fans, driving cultural and tourism consumption by over 700 million yuan, truly achieving the feat of one person driving a city.

Considering the certainty of returns from investing in concerts and the substantial profits, on May 2nd, the superstar legend completed a HKD 220 million placement. Of this, 79.8 million Hong Kong dollars will be used for investing in and planning physical concerts with collaborating artists, 60.5 million Hong Kong dollars will be used to strengthen entry into the metaverse ecosystem, and 60 million Hong Kong dollars will be used for mergers and acquisitions related to the company's main business.

The superstar legend stated that it is optimistic about the company's revenue-generating ability in investing in physical concerts by artists, while the metaverse technology is expected to be combined with the company's artist IP to create new performance increments.

However, for the superstar legend, obtaining dividends through concerts is not the main means or ultimate goal of the company's profitability. It hopes to fully leverage the empowering effect of IP on new retail through concert scenes, redirecting the traffic attracted by concerts to relevant IPs and its new retail products, converting foot traffic and popularity into economic benefits, and completing a full commercial ecosystem.

In fact, the superstar legend's business model is based on its unique "Star IP + New Retail" model. This model combines the influence of star IPs with new retail, creating revenue for both business lines and promoting the sales of new retail products through the enhancement of star IPs, transforming star effects into product sales, thereby driving performance growth Taking the concerts in Hangzhou and Fuzhou as examples, the product displays of "Zhou Tongxue Dawang", pop-up stores, vending machines, and the AR check-in activity "Finding Zhou Tongxue" at the concerts provided excellent IP promotion and marketing opportunities for Superstar Legend, facilitating the integration of new retail business and fully unleashing the potential of celebrity IPs to achieve synergies between the two major businesses.

According to data, Superstar Legend owns two super IPs including Jay Chou's two-dimensional image "Zhou Tongxue" and "National Fitness Coach" Liu Genhong, and has been continuously expanding its IP matrix in recent years, building a star IP matrix including Sun Yao Wei, Chen Farong, Fang Wenshan, Vivi, and Nan Quan Mama, enriching the company's IP lineup through a snowball effect.

Data shows that in 2023, Superstar Legend achieved revenue of 430 million yuan, a 25% increase year-on-year; adjusted net profit (excluding listing expenses and share-based compensation expenses) was 74.40 million yuan. The revenue growth was mainly driven by the income from IP creation and operation business, which increased by 82.9% year-on-year to 190 million yuan, primarily due to the commercial value release of Jay Chou-related IPs and the monetization of the company's star matrix through live streaming e-commerce.

Looking ahead to 2024, Superstar Legend's IP creation and operation will continue to have new momentum, mainly in three aspects:

1. Collaborating with China Mobile's music platform Migu Music to launch a series of video ringtones featuring its star IPs (such as "Zhou's Journey 2"), allowing users to download and use them as personal ringtones. The company will layout this area through various operating models such as sharing user ringtone fees or data package fees with the mobile operator.

2. Rich variety of upcoming variety shows: "Zhou's Journey 3" is in production; "Happy Music Happy" is expected to be broadcast in 2024.

3. Diversified event investments and/or planning: "Jay Chou 'Carnival' World Tour Concert 2024", Sun Yao Wei's "It's Nice to Know You ²" World Tour Concert, Liu Genhong and Wang Peiyun (Vivi) participating in the "Fitness Carnival", as well as virtual concerts in the "Metaverse".

Following the successful implementation of the "IP + Scene + New Retail" strategy at Jay Chou's concert, Superstar Legend has the opportunity to replicate this model in offline activities of other star IPs such as Liu Genhong, Sun Yao Wei, and Nan Quan Mama, thereby achieving a more sustainable development of the ecological business model.

In addition to the strong performance of the IP business, Superstar Legend's new retail business has also achieved great success. Its brand Modong Coffee has maintained the top position in the Chinese bulletproof coffee market for four consecutive years, while Aichixian Moro Matcha Powder became the number one product in the Douyin natural powder track market share in 2023. Of particular note, in January 2024, the "Modong" brand was awarded the "Highly Renowned Trademark in Jiangsu Province", demonstrating its market visibility and competitiveness.

The successful business model has made Superstar Legend's stock price highly influential in the capital market. Since its listing on the Hong Kong Stock Exchange on July 13, 2023, the company's stock price reached 11.12 Hong Kong dollars as of May 23, an increase of 162% from the IPO price of 4.25 Hong Kong dollars Ranked as the tenth best-performing new listing in the past 12 months.

The strong business and market performance of Legend of the Giant Star in April has led to recommendations from multiple securities firms. Following Minsheng Securities' research report maintaining a "buy" rating with a target price of HKD 13.80, Southwest Securities also commented on Legend of the Giant Star's 2023 annual report, maintaining a "hold" rating and optimistic about the company's ability to operate and monetize its IP in the long term.

On May 13th, Yingli Securities released the first coverage report on Legend of the Giant Star, awarding a "buy" rating. The report pointed out that due to the unique value of Legend of the Giant Star's star IP and its close integration with live streaming business, it has significant growth potential. Therefore, a valuation was conducted using a 57.5x2024E P/E (forward 1-year price-to-earnings ratio), resulting in a target price of HKD 14.18 per share.

According to public information, the international index compiler MSCI announced the semi-annual index adjustment results on May 15th, with Legend of the Giant Star being included in the MSCI index. This adjustment will take effect after the market closes on May 31, 2024. In response to this news, on May 16th, Legend of the Giant Star's stock price showed strong performance, closing up over 7% at HKD 11.78, hitting a historical high and approaching a market value of nearly HKD ten billion. Overall, its future market performance is worth looking forward to