JYP shares soar in anticipation of new girl group debut in U.S.

JYP Entertainment Co. logo [Courtesy of JYP Entertainment]

JYP Entertainment Co., one of Korea’s four biggest entertainment companies in South Korea, has seen a steady influx of money from foreign investors, leading to a significant increase in stock prices over the past month, driven by expectations of its new girl group in the U.S.

According to the Korea Exchange, JYP’s stock rose by 19.55 percent between March 14 and April 14, making it the second-highest among entertainment stocks, just behind Hybe Co., which experienced a stock price surge due to a management dispute with Kakao Corp. over control of SM Entertainment Co.

During the same period, foreign investors purchased JYP shares worth 74.7 billion won ($56.85 million). As of April 14, foreign ownership of JYP was 43.21 percent, which is more than double of its competitors, SM Entertainment at 17.72 percent, Hybe at 16.71 percent and YG Entertainment Co. at 10.11 percent.

JYP’s foreign ownership has been steadily increasing, surpassing 30 percent in November, from some 20 percent at the beginning of last year.

The surge in stocks can also be attributed to JYP’s stable governance structure through its multi-label system. JYP was the first Korean entertainment company to introduce a multi-label system in July 2018, allowing for independent marketing, planning and management for each artist, thereby building multiple sustainable intellectual properties.

The importance of a systematic production process has become increasingly apparent in the K-pop industry as artists look to expand their reach into the global market.

JYP’s multi-label system allows for the debut of new artists every year, annual releases of two albums per artist and tour activities, and this provides financial visibility of the company, said Cha Yumi, an analyst at Mirae Asset Securities Co.

JYP has focused primarily on music-related activities, with most of its subsidiaries involved in music production and distribution. In contrast, companies like SM and Hybe have expanded into gaming, advertising and restaurant businesses. Hybe has a total of 52 subsidiaries in South Korea and overseas, while SM has 29.

JYP’s simple business structure and focus on its core music business have been positively received in the market. The company’s operating profit margin in 2020 was 27.94 percent, which is higher than Hybe’s 13.34 percent and SM’s 10.69 percent.

JYP has partnered with Universal Music’s Republic Records to debut a new girl group in the U.S., which is also expected to boost JYP’s stock.

According to FnGuide, JYP’s first-quarter revenue for this year is projected to grow by 41.45 percent on year to 95.9 billion won, while operating profit is expected to rise by 34.90 percent to 25.9 billion won.

Analysts believe that JYP’s new girl group has the potential to generate significant revenue in the U.S. market, which could be comparable to the company’s annual revenue. Despite competition from other Korean entertainment companies like Hybe, which is also preparing to debut a girl group in the U.S., the positive impact on JYP’s business is expected to be significant. Local securities firms already raised JYP’s target stock price, reflecting the positive outlook for the company’s future performance.