Bona Film Research Report: Not just working for BAT

From its establishment in 1999 to today, Bona Films has had considerable influence in the China film industry. While people marvel at the rapid development of this traditional film company, they cannot ignore the question of whether the rapid development of the Internet will subvert the film industry. The Internet wave is coming. What kind of company is Bona Films, which has attracted much attention? How can traditional film companies weigh the resources of all parties to improve?

"In the future, the entire film industry will work for BAT."

This is the view expressed by Yu Dong, CEO of Bona Films, at the Shanghai Film Festival. Just this month, Bona Film Group announced that it had reached a final privatization merger agreement with the takeover consortium. Among the original buyer consortium members of the deal, Alibaba and Tencent each accounted for one seat.

From its establishment in 1999 to today, Bona Films has had considerable influence in the China film industry. While people marvel at the rapid development of this traditional film company, they cannot ignore the question of whether the rapid development of the Internet will subvert the film industry. The rise of Internet TV, mobile Internet, and small screens has swallowed up the big screen market. The financial and channel advantages of Internet giants are also no small threat to traditional film companies.

This is both a challenge and an opportunity. The Internet wave is coming. What kind of company is Bona Films, which has attracted much attention? How can traditional film companies weigh the resources of all parties to improve? To this end, the reporter compiled Bona Film's business, financial data and financing history based on public information to facilitate analysis and judgment by investors and readers.

The business focuses on distribution to open up upstream and downstream.

Bona Film has always been to open up upstream film production and downstream theater construction with distribution as the core. Specifically, Bona Films mainly has the following four businesses:

film publicity. Bona Films 'core business is film distribution in the mainland of China and Hong Kong. In the more than ten years from 2003 to 2014, Bona Films distributed or invested in a total of 202 films, 55 of which were international films. Bona Films said it distributes about 15 films per year.

Judging from various data, distribution business is also the main source of income for Bona Films. Bona's issuance models are very diverse, including pure agency, guaranteed bonus, buyout, participation in investment, etc.

Produced. Bona Films has also been involved in the production of many films. Bona's film investment business began in 2007. As of December 31, 2014, Bona Films had a total of 62 investment films released. In recent years, Bona's online copyright sales revenue has continued to hit new highs. Tencent, Youku Tudou, Sohu, LeTV, etc. have all reached cooperation agreements with Bona.

It has to be mentioned that in addition to investing in films, Bona has also invested heavily in TV series such as "The Legend of Chu and Han".

Theater. Bona Films acquired Bona Starlight in July 2011, and the studios opened one after another. Last year was arguably the largest year for construction at Bona Theater. In 2014, Bona Cinema's business revenue reached US$79.8 million, a year-on-year increase of 29.7%, and grossed 440 million yuan in box office.

As of December 31, 2014, Bona has officially operated 25 theaters with a total of 208 screens.

Artist manager. According to the official website of Bona Films, its artist library includes Yuan Quan, Huang Yi, Chen Zhipeng, Chen Jianbin, Gao Hu, Lan Zhenglong and others.

The financial report shows that in 2014, the profit of the film distribution business accounted for 60.8% of the total profit, the film investment and production business accounted for-8.0% of the total profit, the cinema profit accounted for 46.4%, and the artist brokerage accounted for only 0.8%. In fact, the box office of movies in China hit a record high in 2014, reaching RMB 29.6 billion, an increase of 36% from 2013. During this year, Bona produced and distributed a total of 12 films, of which domestic films received a total of 2.6 billion yuan in the mainland box office, accounting for 15% of the domestic film market share.

In terms of company executives, Yu Dong is chairman and CEO. He graduated from the Department of Management of Beijing Film Academy and was assigned to work at Beijing Film Studio. In 1999, Yu Dong founded Beijing Bona Cultural Exchange Co., Ltd., which is also the first private film distribution company in China. Qi Zhi is the chief financial officer and became the CFO of Bona International Pictures in 2014. He has more than 10 years of experience in financial reporting, fund management and capital markets. Chen Yongxiong has served as the company's chief operating officer and director since 2009.

Financing history and main financial data after listing

Before going public in the United States, Bona Films conducted several rounds of financing: in July 2007, Sequoia China and SIG Haina Asia Venture Capital Fund invested US$10 million in Bona Films; In June 2009, Bona Films completed the second round of financing of 100 million yuan; in June 2010, it completed the third round of financing.

At the end of 2010, Bona Films successfully listed on NASDAQ in the United States with an issue price of US$8.50.

In May 2012, News Corporation invested in Bona Film Group as a strategic investor. Bona Films signed a letter of intent to cooperate with its subsidiary Fox International Productions (FIP).

In 2013, Bona Films, Noah Holdings and Sequoia Capital (China) jointly launched China's first film and television professional investment fund-Bonanoia Film and Television Fund, raising 1 billion yuan in the initial phase.

In 2013, Bona Films received another US$20.8 million in investment from Fosun Group, as well as a loan of RMB 200 million from Minsheng Bank and RMB 80 million from Pudong Development Bank.

In July 2014, Yu Dong and Fosun International jointly increased their holdings in Bona's shares. Yu Dong bought back a 19.3% stake in Bona from Murdoch's News Corporation, while Fosun bought a 13.3% stake in Bona from Yu Dong. After the transaction closed, Yu Dong held 32.3% and Fosun held 20.8%.

In March 2015, Bona Films announced that the second phase of the Bona Film and Television Investment Fund was successfully raised, raising a total of 1.7 billion yuan. This fund will be invested in about 50 films and TV series developed by Bona in the next two to three years. and online dramas.

In June 2015, Bona Films announced that its board of directors had received privatization offers from Chairman Yu Dong, Sequoia Capital and Fosun International, and the three companies jointly made an offer to acquire Bona at a price of US$13.7 per share.

Bona Film Investor Relations shows that as of December 31, 2014, Bona Film had a total of 1163 full-time employees. As of September 31, 2015, Bona Films had $150 million in cash and cash equivalents.

Whether future development can be expected and whether resources can be weighed is the key.

"What really made me decide to return to A-shares is that" Taking Tiger Mountain by Wisdom "has achieved such good box office results for Bona, but the company's share price on Nasdaq has been falling again during the same period, which makes me very sad."

When talking about privatization, Yu Dong blamed most of the reasons on the US market's underestimation of the value of China companies. At present, the market value of Huayi Brothers in A-shares is nearly 60 billion yuan, and the total market value of Enlight Media is nearly 50 billion yuan, while the market value of Bona Films, which is of similar size, is only 830 million US dollars, or about 5.37 billion yuan.

However, if you look deeper, I am afraid that the power of China Internet companies is also an important factor in Yu Dong's decision. Today's film industry is already inseparable from the Internet. Whether it is fan introduction, traffic injection, crowdfunding, online seat selection or Internet marketing distribution, or even big data support for film production, the development of IP, the Internet is everywhere.

However, judging from the shareholding structure, Bona may not really "become" a wage earner. At present, the largest shareholder of Bona Films is still Chairman Yu Dong, holding 32.3%. Next is Fosun Group, which holds 20.8%.

When the privatization transaction is completed, Alibaba Pictures 'wholly-owned subsidiary will invest US$86 million to indirectly hold approximately 10% of Bona's equity, and Tencent's subsidiaries will also receive approximately 7% of the shares.

Yu Dong, the largest shareholder, and Fosun, the second largest shareholder, have a total shareholding of more than 53%, and the cooperation between Yu Dong and Fosun also has many aspects worthy of attention. Yu Dong once revealed in a public interview: "Bona may join forces with Fosun to do many things, focusing on upstream and downstream integration of the film industry, such as theme parks."

Bona can do more to work with Internet giants.

For example, after the privatization transaction of Bona Pictures is completed, Alibaba Pictures will invest approximately US$86 million and indirectly hold approximately 10% of Bona Pictures. In April this year, Alibaba Pictures acquired Yueke Software for RMB 830 million. In early November, Taobao Movies and Entertainment Bao merged into Alibaba Pictures for US$520 million. Through a series of integrations, Alibaba Pictures will become a full-industry chain entertainment platform driven by the Internet and with fan operations, investment and financing, content production and production, publicity and distribution, and theater service capabilities. These will become resources that Bona can utilize.

"BAT can buy channels, systems, and services, but the film industry is highly dependent on content creativity. Bona's productivity in high-end content such as movies and offline physical theaters are exactly what these Internet giants need. "Yu Dong said in an interview.

The advantages of Internet giants in terms of channels and funds are not something that film and television companies can compete with. The only solution now is to cooperate as much as possible, integrate and utilize Internet resources faster and better, and quickly open the gap with other film and television companies.

However, according to the research report of China International Capital Corporation, the return of Chinese stocks to A-shares from the U.S. stock market mainly involves three main stages: delisting from U.S. stocks, dismantling of the VIE structure and listing of A-shares. Even if everything goes smoothly in the process, it will take at least two years. The market is changing rapidly. Although there are promising prospects for the future development of Bona Films, there are still many unknowns.

Editor: vian