Round Hill Music Royalty Fund announced its full-year results for the year end December 2022. The company saw a 13% increase in NAV to US$519.6m driven by active rights management and positive structural music industry tailwinds while revenue increased 32% YOY. The performance continues an impressive period for the company, which has delivered a 35% NAV return since its IPO in 2020.
Despite the positive performance, shares trade on a significant discount of close to 50%.
The annual report noted a number of positive trends for the industry:
- Goldman Sachs revised its global music revenue forecasts upwards by 5% to US$94.9 billion for 2023 and 10% to US$153 billion for 2030, primarily off the back of a stronger 2021 base where revenues exceeded expectations.
- Underpinned by the sustained success of streaming, which saw a 10.3% growth in subscription revenue, global revenue from recorded music grew by 9% in 2022 to US$26.2 billion[3], an eighth consecutive year of growth
- New platforms for content consumption represent opportunities to drive further growth for the music industry, through social media, the metaverse and gaming, providing new routes for consumers to discover music and revenue growth through licensing
Chairman, Robert Naylor, commented on the company’s performance while also noting the discount which management believes is not a fair reflection of the underlying value provided:
“Today’s results, including the impressive double digit revenue and valuation growth, reflect the strength of the company’s portfolio; the inherent value that Round Hill, the investment manager, has been working to unlock; and the accelerating momentum behind the music industry. The two independent valuation reports commissioned by the board underline this assessment and our view that Round Hill Music is currently undervalued by the market. We therefore remain confident that, even in challenging market conditions, Round Hill Music Royalty Fund is well positioned to continue to deliver sustainable revenue and value growth.”
Josh Gruss, CEO of Round Hill Music LP, the company’s investment manager, said:
“The positive results that we have delivered on behalf of Round Hill Music Royalty Fund stem largely from the efforts of our entire 70 plus team, whose deep expertise in catalogue management and passion for music, when applied to our catalogues, translates directly into sustainable value and revenue growth. The 51 catalogues that make up the Company’s portfolio reflect our careful investment approach, which is concentrated on older vintages preceding the early 2010s that have demonstrated durable, time-tested royalty cash flows that have withstood various economic cycles.
“The opportunities for music monetisation are expanding and Round Hill is well placed to take advantage of these and other structural tailwinds. Given the quality of our catalogues and the positive outlook for the music industry, we are excited and energised about the future.”
RHM : NAV growth at odds with discount for Round Hill Music