Cityneon Holdings - DBS Research 2016-06-29: Las Vegas jewel

Cityneon Holdings - DBS Research 2016-06-29: Las Vegas jewel CITYNEON HOLDINGS LIMITED 5HJ.SI 

Cityneon Holdings - Las Vegas jewel

  • Las Vegas site visit – seeing is believing
  • Higher assumption of seven sets by end 2017
  • Raised earnings for FY17F and FY18F by 12-14%
  • Maintain BUY with higher TP of S$1.20



Creator of innovative and interactive exhibitions, with explosive growth ahead. 

  • Trading at a low PE-to-growth multiple of < 0.1x with explosive FY15-FY18F EPS CAGR growth of about 300%, Cityneon is attractive to investors seeking growth and unique ideas in the entertainment industry. 
  • An expanding project pipeline, plans to add a third Intellectual property rights (IP), and potential tie-ups with strategic investors like CMC Holdings are catalysts.


Scalable business model with low execution risk. 

  • Cityneon’s earnings are directly correlated with the number of exhibits it has. So far, it has two permanent sets in Las Vegas and another two travelling sets; in just the month of June, Victory Hill Exhibitions (VHE) has already announced two additional locations – Australia and Singapore - to host and operate the Avenger S.T.A.T.I.O.N.


Raised our assumption to seven sets by end of 2017. 

  • We believe Cityneon would require more sets to meet the overwhelming demand. 
  • We now expect a total of seven sets by the end of 2017, up from six previously, and maintain our assumption of eight sets by the end of 2018. The group operates a relatively low execution risk model as outside the US, it will find partners in the target region to undertake the operating risks.


Potential for third IP. 

  • There is a huge pool of franchises that meet management’s criteria of box office of > US$1bn and with sequels in the pipeline. Some attractive options include Star Wars, Jurassic Park, Batman and Spiderman. 
  • We expect the VHE team to leverage their credentials in developing the Avengers and Transformers exhibits to leapfrog to the next IP.


Valuation:


Maintain BUY with higher TP of S$1.20. 

  • With the additional set assumed in FY17, we have raised our earnings for FY17F and FY18F by 14% and 11% respectively. 
  • Maintain BUY with higher TP of S$1.20, up from S$1.05, based on peer average PE valuation of 15x FY17F earnings.


Key Risks to Our View:

  • VHE’s limited track record. VHE was formed in 2012 and the first exhibition was in New York in 2014.




LING Lee Keng DBS Vickers | http://www.dbsvickers.com/ 2016-06-29
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.20 Up 1.05


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