Cityneon Holdings - DBS Research 2016-08-15: Catalysts in sight

Cityneon Holdings  - DBS Vickers 2016-08-15: Catalysts in sight CITYNEON HOLDINGS LIMITED 5HJ.SI

Cityneon Holdings - Catalysts in sight

  • 1H16 results above expectations; driven by newly acquired VHE.
  • Potential catalysts include securing third IP and entry of strategic investor.
  • Maintain BUY with a higher TP of S$1.37.



Impressive results with new business segment incorporated.

  • Cityneon’s strong set of 1H16 results was driven by newly acquired VHE. 
  • Net profit of S$4.7m accounts for 63% of our FY16F forecast of S$7.4m. 
  • Trading at a low FY17F 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. The group recently announced its forthcoming openings in Singapore (October 2016), Taipei, Taiwan (June 2017) and Sydney, Australia (December 2017). We believe that more sets would be needed to fulfill the overwhelming demand. 
  • We expect a total of seven sets by end-2017, and eight sets by 2018. 


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 Victory Hill Exhibitions (VHE) team to leverage their credentials in developing the Avengers and Transformers exhibits to leapfrog to the next IP.


Valuation

  • Maintain BUY with a higher TP of S$1.37, up from S$1.20, based on peer average PE valuation of 17x FY17F earnings, instead of 15x previously. 
  • The sector has re-rated; peers' share prices have shot up 15- 20% in the last two months.


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.




Lee Keng LING DBS Vickers | http://www.dbsvickers.com/ 2016-08-15
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.37 Up 1.200


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