|InvestingNote Screengrab as of 21 March 2.20pm|
Overall, it seems that more investors prefer a stable company than one is burning cash. But I have a feeling if I reveal the names of the companies, things may change?
Nevertheless, did I carry out this exercise so that I understand more about investors? NOPE.
I was actually looking to invest into TVB due to their recent share price drop and negativity news.
Thus, I was looking for a competitor to compare its financials and I picked Netflix.
Many may disagree that they have the same business model. But in my opinion, their strategy as stated below are probably having over 60% similarity.
- Established actors and actress in HK (Some are very famous overseas as well).
- Stable Base in HK
- Advertising Revenue
- Consistent upbringing of new actor and actress.
- Famous actors and actress leaving for China (Eg Charmaine Seah)
- Seem to have a reducing base in Asia
- Does not appeal to westerners.
- Streaming websites
- Switching to Internet TV
- The growth into China has always seem to be a roadblock.
- Use lesser Known Actor and Actress to act as lead, Cheaper.
- Cheap production + Good story-line
- Opening up to international audience (Turkey, Korean)
- Consistent upbringing of new actor and actress to fame or fame again.
- Not getting into Apple TV Service
- Yet to get into China.
- Streaming websites
- The significant number of dramas on-going - to increase cost
- Short seasons, if the season get more popular, will the actor and actress be willingly to work for less.
- How long can good story-lines continue to increase?
After comparing their strategy and their financials, I decided to ignore both companies and move on.
Firstly, I ignore Netflix simply due to its cash burning business and increasing debt. I am uncertain if their business is for the super long hual.
Secondly, I ignore TVB due to their recent negative scandals. Basically, they invested over HK$800 million in SMI Holdings Bonds in order to get more access into China. Since SMI Holdings had to be suspended and restructure, the bonds took a HK$500 million impairment. This resulted in the company having losses of $200 million.
Although the last sentence do indicate that TVB does have $300 million of cash profit for 2018, but I will have prefer if their impairment was the full impairment of HK$800 million. This is because in this case, I will not need to worry about them taking a second impairment in future.
On the other hand, I do believe SMI Holdings will recover from the setback and TVB may end up have a controlling stake in SMI Holdings. But these are assumptions with huge uncertainty and significant risks involved.
Therefore, there seems to be too much uncertainty at stake and I choose not to invest in either company.