MM2 ASIA LTD
43D.SI
mm2 Asia - Clarity on North Asia strategy
- Go for niche markets in North Asia; adaptation of successful movies.
- We lift FY17F and FY18F earnings by 3% and 10% respectively.
- Maintain BUY with higher TP of S$0.83.
Niche markets; adaptation of successful movies.
- mm2 provided more clarity on its strategy in North Asia at the recent corporate access day that was co-organised by DBS and SGX. Targeting niche markets and replicating the successful business model in Singapore will be the key focus.
- We expect mm2 to grow at an EPS CAGR of 54% from FY15- FY18, underpinned by growth in productions, expansion into the China market, and contribution from cinema operations and newly acquired entertainment company, UnUsUal Group. The entry of StarHub with a 9.05% stake could raise its profile and pave the way for bigger opportunities ahead. We maintain our BUY call on mm2 with a higher target price of S$0.83.
UnUsUal listing.
- The successful listing of UnUsUal, which mm2 acquired at 10.2x PE back in February 2016, would enable mm2 to crystallise gains and to unlock value, and allow UnUsUal to tap on public funds for expansion.
Valuation:
Maintain BUY with higher TP of S$0.83.
- Earnings for FY17F and FY18F are revised up by 3% and 10% respectively, on higher contribution from its core business.
- mm2 is trading at 19x FYMar17F PE and 15x FY18F PE, based on its enlarged share capital, compared to peers’ 24x FY17F PE.
- Using peers’ average of 24x, up from 22x, we derive a higher target price of S$0.83 on FYMar17F EPS, vs S$0.75 previously. The stock offers potential upside of 24%, and trades at an attractive PEG of 0.24x.
- Maintain BUY.
Key Risks to Our View:
- No long-term financing arrangements for productions. The commencement of each production is dependent on mm2’s ability to secure funding.
- Productions may be adversely affected by delays and cost overruns. The production process is subject to a number of uncertainties, most of which are beyond mm2’s control.
LING Lee Keng
DBS Vickers
|
http://www.dbsvickers.com/
2016-07-01
DBS Vickers
Analyst Report
0.83
Up
0.75
