Golden Harvest shares soar 39pc after deal to sell its mainland cinemas

The Hong Kong studio that made Bruce Lee and Jackie Chan famous divests its mainland China cinemas in HK$3.3bn deal

PUBLISHED : Friday, 10 February, 2017, 3:47pm
UPDATED : Friday, 10 February, 2017, 11:02pm

The iconic Hong Kong film studio that brought Bruce Lee and Jackie Chan to fame saw its shares shoot up as much as 39 per cent on Friday after selling its mainland cinema arm for HK$3.3 billion, in a move underscoring a potential return to film production for the 47-year-old company.

Orange Sky Golden Harvest Entertainment said it will set aside about HK$1 billion from the net proceeds to pay special dividends while the rest will be used to repay debt and cultivate its remaining business. Shares in the company soared as much as 39 per cent on Friday morning to HK$0.96.

The buyer, Nan Hai Corp, an entertainment-to-real estate conglomerate that runs China’s second largest cinema chain Dadi Cinema, also got a boost from the deal with its shares leaping as much as 8 per cent to HK$0.27 in Hong Kong trading.

The deal, which will see Golden Harvest cash out of all of its 75 theatrical exhibitors in Shanghai, Beijing and other major Chinese cities, signals another major business shift after it had previously pivoted from a film producer to a cinema operator since the 2000s.

After the transaction it will now be left with six movie theatres in Hong Kong, 14 in Taiwan and 11 in Singapore.

“Running a cinema in China is a tough job, especially when you are not big enough and the overall movie market suffers a setback,” said Ray Zhao, a media analyst with Guotai Junan Securities.

Golden Harvest said it planned to ramp up its film production business through either co-financing or making an average of two or three “mid-to-large scale” titles every year, possibly based on blockbusters from the glory days of the 1970s.

While the golden era of Hong Kong movies under Golden Harvest is a thing of the past, the studio, which thrived in the 1970s, rose to dominance in the 1980s, but lost its shine in the 1990s. However, it remains a cultural icon in the eyes of Chinese audiences.

It nurtured the success of Bruce Lee’s kung-fu films, including Way of the Dragon, which gave Hong Kong productions their global appeal. Jackie Chan’s 1980 directorial and starring debut, The Young Master, wowed Japan, paving the way for the Hong Kong actor to rise to international stardom years later.

But the last two decades has witnessed a struggling Golden Harvest studio, a similar fate that befell its local rival Shaw Brothers earlier, amid the double whammy of the Asian Financial Crisis and fierce competition from mainland counterparts led by Huayi Brothers Media.

In 2005, Golden Harvest made a foray into the theatrical exhibition market across the border with its first flagship cinema launched in Shenzhen. While growing in scale, its mainland cinema unit started bleeding red over the last three years, dragging the company into a loss of HK$180 million in 2015, according to the company’s filing to the Hong Kong stock exchange.

Looking forward, it is likely that many of its classic box office hits are poised to come back to life.

“The company’s film library has 135 Chinese and English films and we have identified around 20 films which have the market potential for film remakes,” it said in a filing to the Hong Kong stock exchange.

One of Golden Harvest’s prominent releases was The Soong Sisters, which saw actress Maggie Cheung win best actress award at the 1998 Hong Kong Film Awards.

Golden Harvest shares pared back some of their gains to close at HK$0.78, up 13 per cent, while Nan Hai settled Friday trading up 4.08 per cent at HK$0.255.