Cityneon Holdings - CIMB Research 2016-07-13: Touring the globe with superheroes

Cityneon Holdings - CIMB Research 2016-07-13: Touring the globe with superheroes CITYNEON HOLDINGS LIMITED 5HJ.SI 

Cityneon Holdings - Touring the globe with superheroes

  • Travelling set to Taiwan is the 4th addition to VHE’s project pipeline, with more announcements anticipated.
  • Possibly lower ticket ASP in Taiwan, offset by higher merchandise sales.
  • We continue to highlight the scalable business model of VHE’s travelling exhibits with minimal execution risk.
  • Number of travelling sets to increase to three in FY16, four in FY17 and six in FY18.
  • Maintain EPS estimates, target price of S$1.09 and Add rating.

4th addition to the pipeline of travelling sets

  • Cityneon announced earlier that its Marvel’s Avengers S.T.A.T.I.O.N. touring exhibition will travel to Taiwan in Jun 17, for an estimated period of three months. This follows recent announcements of travelling sets to China (Transformers, Dec 16 to Dec 18), Singapore (Oct 16 to Jan 17) and Australia (Dec 17 to Mar 18), apart from the two Vegas attractions and current travelling set in Paris (Apr to Sep 16). We expect more of such agreements in 2016.

More about Taiwan’s touring exhibit

  • Cityneon’s subsidiary (VHE) will partner with Walt Disney (Taiwan) and Beast Kingdom, an established toy and collectibles retailer specialising in production, distribution, concept retail and exhibitions. Beast Kingdom has a track record in local exhibitions, having previously hosted “Disney’s Tsum Tsum Spin Party” in early 2016 and “Captain America: The Winter Soldier Prelude Exhibition” in 2014.

Scalable business model...

  • After an initial investment of US$5m-9m and one year of R&D efforts, each subsequent travelling set only requires US$2m-3m capex and 2-3 months’ turnaround. 
  • For each location/agreement, VHE will not only earn licensing fees of S$1m-5m (depending on market and duration), but also upfront minimum guarantees on royalties from ticket and merchandise sales. There will be profit-sharing for any amount in excess of that.

...with little execution risk for VHE

  • Meanwhile, operating and marketing costs are borne by the local partners (such as Beijing Starclouds Entertainment, Singapore Science Centre), leaving little execution risk for VHE. 
  • A travelling exhibition typically lasts for 3-4 months, with potential for extension should the response be good, similar to its first exhibit in New York (May 14 to Sep 15). Hence, each travelling set may be utilised up to thrice per year assuming a well-filled schedule.

Keep forecasts unchanged; reiterate Add rating with TP of S$1.09 

  • Given its tight project pipeline, the number of travelling sets increases to 3/4/6 by FY16/17/18 respectively, vs. 2/4/6 previously. 
  • We tweak our capex assumptions but retain earnings estimates. 
  • While the Taiwan travelling set may not command as high a ticket ASP as Paris’ 22€, this could be mitigated by stronger merchandise sales, backed by Beast Kingdom’s wide merchandise range. 
  • We maintain our Add call with an unchanged target price of S$1.09 (pegged to 15.5x FY17 P/E, 5% premium to peers’ average). 
  • Downside risk to our call is poor execution on the new Transformers sets.

NGOH Yi Sin CIMB Securities | William TNG CFA CIMB Securities | 2016-07-13
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 1.09 Same 1.09