mm2 Asia (MM2 SP) - DBS Research 2017-07-24: Approval For Completion Of Golden Village Cinema Acquisition Not Obtained

Mm2 Asia (MM2 SP) - DBS Vickers 2017-07-24: Approval For Completion Of Golden Village Cinema Acquisition Not Obtained MM2 ASIA LTD. 1B0.SI

Mm2 Asia (MM2 SP) - Approval For Completion Of Golden Village Cinema Acquisition Not Obtained

  • mm2 and the seller are currently in discussions on their available options.
  • mm2 has no funding issues for the proposed acquisition of the Golden Village (GV) cinema chain.
  • Maintain BUY call and Target Price of S$0.75, which include the GV acquisition for now.



What’s New 

  • mm2 has not obtained the approval to acquire a 50-per-cent share of the Golden Village (GV) cinema business in Singapore from the owner – as required under the agreement entered on 13 June 2017 – by the scheduled completion date of 21 July 2017.
  • mm2 and the seller, Village Cinemas Australia, are currently in discussions on their available options. 

Comment 

  • As far as mm2 is concerned, there is no funding issues as the group has already secured the funding needs for the proposed S$184.3m acquisition via equity and debt financing. To date, mm2 has already raised S$65m via placement of new shares and another S$93.04m from convertible debt, with the balance S$26m from bank borrowings. 
  • The issues seem to stem from the seller as Village Cinemas Australia is owned by Village Roadshow, which is listed on the Australian Securities Exchange. The other 50% stake in GV is owned by Orange Sky Golden Harvest, listed on Hong Kong Stock Exchange.
  • Assuming the GV acquisition is completely called off, based on our previous earnings forecasts – before the proposed GV acquisition – and using an enlarged share capital to account for the recent share placement, we are still expecting EPS growth of 7% for FY Mar18F and another 24% for FY Mar19F.
  • Based on mm2's current share price of S$0.52, mm2 is trading at PE of 27.0x and 21.8x for FY Mar18 and FY Mar19 respectively, without the incorporation of GV, which is not excessive compared to peers of 37.6x and 25.2x, based on current year and next year’s earnings.
  • We maintain our BUY call and TP of S$0.75, which includes the GV acquisition for now, pending further development on the GV acquisition.




Lee Keng LING DBS Vickers | http://www.dbsvickers.com/ 2017-07-24
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.750 Same 0.750



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