CITYNEON HOLDINGS LIMITED
5HJ.SI
Cityneon Holdings - Turnaround led by immersive exhibits
- 1H16 core net profit of S$4.7m (US$3.5m) above our/consensus FY16 numbers; also marked CITN’s turnaround from loss-making in 1H15, thanks to VHE.
- VHE’s travelling sets skewed our 1H16 earnings and margins upwards.
- Higher ASP, retail sales contributed to Vegas’ commendable performance in June.
- We raise our FY16-18F EPS estimates and target price to S$1.19. Maintain Add.
- Winning of 3rd licensing right a near-term catalyst; key risk lies in execution of Transformers in Vegas.
Turned around from 1H15 loss in 1H16 , thanks to VHE
- CITN’s 1H16 core net profit of S$4.7m beat expectations at 82%/71% of our/consensus full-year forecast, leapfrogging its S$0.7m core net loss in 1H15, before it acquired Victory Hill Exhibitions (VHE).
- Ex-VHE, core business sales declined 11.3% yoy in a seasonally-weaker 1H16, and while gross margin improved to 25% (1H15: 23.5%), the core business stayed loss-making.
- Management aims to achieve profitability for this segment, which also benefitted from increasing awareness of VHE, by end-16.
Travelling sets proved its scalable, high-margin model
- VHE contributed S$10.2m sales in 1H16, of which c.30% came from the Avengers’ permanent set in Las Vegas (only opened in Jun 16), and the balance 70% from travelling sets. The results beat was due to a combination of
- better-than-expected sales performance from Vegas, and
- partial recognition of China’s licensing fees ahead of its Transformers’ touring exhibit (Dec 16 – Dec 18).
- The sales mix changes lifted CITN's overall gross margins from 1H15’s 23.5% to 1H16’s 38.8%.
Vegas revenue boosted by higher ASP and merchandise sales
- We think the strong sales performance of Vegas’ Avengers S.T.A.T.I.O.N can be attributed to the higher ASP of c.US$30 (vs. US$28 previously) on top of ticket admin fees of US$5 per pax and equipment rental of US$5, as well as merchandise sales.
- Management plans to expand the existing retail space to fit a wider merchandise range to ride the popularity of Avengers’ superheroes. The attraction is also more popular in the daytime, as seen by the 65/35 traffic flow in AM vs. PM session.
FY16-18F EPS estimates up by 5-48%
- We adjust our assumptions to account for the following:
- full amount of licensing fees from China’s Transformers set in FY16,
- lower operating costs in FY16, and
- higher sales contribution from Vegas for FY16-18.
- The adjustments lift our FY16-18 EPS estimates by 5-48%, and our target price rises to S$1.19 (still pegged to 15.5x FY17F P/E, 5% premium to peers’ average). Reiterate Add.
3 rd IP a key catalyst; naming rights can offer more earnings upside
- Near-term catalysts for CITN could come from
- successful launch of the Transformers’ exhibit to further drive traffic flow to its Vegas attractions, and
- winning of 3rd licensing right.
- Downside risk to our Add call is lower-than-expected ticket sales in Las Vegas.
- We also see the potential for a dividend resumption from FY17 onwards, based on its historical payout ratio of 30-35% and strong earnings momentum.
NGOH Yi Sin
CIMB Research
|
William TNG CFA
CIMB Research
|
http://research.itradecimb.com/
2016-08-12
CIMB Research
SGX Stock
Analyst Report
1.190
Up
1.090
