MM2 ASIA LTD
41C.SI
mm2 Asia - Premier movie producer
- Riding on growing demand and support for local production; gaining traction overseas
- High margins business model; new revenue streams to strengthen competitive edge and build recurring income base
- Spreading its wings in China, one of the world’s most lucrative movie markets to support growth
- Initiate with BUY, S$1.05 TP
• Riding on growing demand and support for local production; gaining traction overseas.
- mm2 Asia (mm2) is poised to ride on the growing demand for local production and will continue to grow its presence in Taiwan, Hong Kong and China, by leveraging on the business relationships it has established.
• Spreading its wings in China to support growth.
- We expect mm2 to grow at EPS CAGR of 40% for FY15 to FY18F. To support this growth, mm2 intends to spread its wings to one of the most lucrative movie market – China.
- The group has already co-produced several productions in China since 2013 and is currently working on a few movies in China. Chinese films generally have bigger budgets and better margins than local productions.
• High margins business model; new revenue streams to strengthen competitive edge.
- Besides movie production and distribution which offers high gross margin of about 40% to 45%, mm2 recently acquired five cineplexes in Malaysia and some related businesses.
- Cinemas will provide a source of recurring income to the group and cost savings in the longer term, as mm2 usually has to pay about 50% of its gross intake receipts for rental of cinemas.
- EBITDA margin for cinemas is about 15%.
• Initiate with BUY, S$1.05 TP.
- mm2 is trading at 23x FYMar16F PE and 14x FY17F PE, based on its enlarged share capital, compared to peers’ 27x FY16F PE.
- Taking a 30% discount to peers given its much smaller size, we arrive at a target PE of 19x to derive our target price of S$1.05 on FY Mar17F EPS.
- The stock offers a potential upside of 36%, and it trades at an attractive PEG of 0.31x.
LING Lee Keng
DBS Vickers
|
http://www.dbsvickers.com/
2016-01-05
DBS Vickers
Analyst Report
1.05
Up
1.05
