Cityneon Holdings (CITN SP) - DBS Research 2017-05-15: Entry Of Strategic Investors, General Cash Offer At S$0.90 Per Share

Cityneon Holdings (CITN SP) - DBS Vickers 2017-05-15: Entry Of Strategic Investors, General Cash Offer At S$0.90 Per Share CITYNEON HOLDINGS LIMITED 5HJ.SI

Cityneon Holdings (CITN SP) - Entry Of Strategic Investors, General Cash Offer At S$0.90 Per Share

  • Disposal of controlling stake by Star Media paves way for entry of strategic shareholders.
  • Upon completion of disposal, general offer to be made for remaining shares at S$0.90 each.
  • Support from new shareholders to pursue growth, including acquisition of a third Intellectual Property rights.
  • Maintain BUY, TP: S$1.26.



What’s New 


Star Media to dispose entire stake at S$0.90 per share 

  • Cityneon’s controlling shareholder, Star Media Group Berhad, has entered into a conditional sale and purchase agreement (SPA) with Lucrum 1 Investment Limited, a special-purpose vehicle, to dispose of its entire 52.51% stake in Cityneon, or 128.5m shares at S$0.90 for each, for S$115.6m (RM360.3m) cash. 
  • This transaction values Cityneon at FY16 price-to-earnings ratio of 33x and price-to-book ratio of 3.2x. The proposed disposal is expected to be completed by the third quarter of 2017.

Who is Lucrum 1 Investment? 

  • The shareholders of Lucrum 1 Investment are :- 
    1. Massive Right Investments (owns 76% stake) : Founded and owned by Mr. Geng Zhihua, a Chinese national, in 2015 to invest in high growth potential companies. Mr. Geng has many years of experience in investments, including but not limited to private equity, securities and futures investments.
    2. Philadelphia Investments (owns 15.5% stake): Owned by Cityneon’s Group CEO and Executive Director, Mr Ron Tan.
    3. Mutual Power International (owns 8.5% stake): A special purpose vehicle held solely by Jumpwide Limited, which is owned by Jin Bao Bao Holdings, a company listed on the Hong Kong Stock Exchange. 
    4. Jin Bao Bao Holdings is principally engaged in 
      • the design, manufacture and sale of packaging products and structural components in China, 
      • provision of corporate secretarial and consultancy services, and 
      • property investment.

General offer for remaining shares at S$0.90 each 

  • Pursuant to the takeovers and mergers code, upon completion of the proposed acquisition, Lucrum 1 Investment is obliged to make a mandatory general cash offer for the remaining shares not already owned at S$0.90 per share. 
  • The offer price is at a 5.76% discount to the last trading price of S$0.955 on 5 May 2017 and 0.32% discount to the six-month weighted average price.

Handsome return for Star Media 

  • The proposed disposal allows Star Media to unlock its investment in Cityneon, with a disposal gain of S$68.7m (RM214.1m). It also enables Star Media Group to concentrate on the expansion of its primary business activities, the print and digital segment, which contributed 59% and 62% to FY16’s revenue and profit before tax.
  • Cityneon only contributed 8.2% to Star Media’s FY16 results, based on the 52.51% stake that Star Media owns.

Support from new shareholders to pursue growth, including acquisition of a third Intellectual Property rights 

  • Through the acquisition, CEO Mr. Ron Tan would be able to more effectively influence the strategy, expansion and future direction of Cityneon. 
  • With the support of the new investors, Cityneon is on track to pursue its growth strategy, including acquisition of a third Intellectual property rights (IP) and expanding its regional footprint for exhibition sets. 
  • We continue to expect Cityneon to register explosive FY16- FY19F EPS CAGR growth of c.150%, based on its existing two IP rights. 
  • We maintain our earnings forecasts, BUY call and target price of S$1.26 for Cityneon.




Lee Keng LING DBS Vickers | http://www.dbsvickers.com/ 2017-05-15
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.260 Same 1.260



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