Spackman - RHB Invest 2016-11-11: Blockbuster Masters To Solidify Turnaround

Spackman - RHB Invest 2016-11-11: Blockbuster Masters To Solidify Turnaround SPACKMAN ENTERTAINMENT GRP LTD 40E.SI

Spackman - Blockbuster Masters To Solidify Turnaround

  • A one-off gain from the disposal of Opus Pictures greatly aided Spackman’s 3Q16 results and reduced its 9M16 net loss. 
  • We expect upcoming quarters to see crucial turnaround for the company as it would enjoy cost savings of c.70% on its general and admin expenses post the disposal of Opus Pictures. 
  • In addition, the blockbuster movie Masters is set to be release on the 22nd Dec and should contribute significantly to its 4Q16 NPAT if the movie is a success. 
  • We remain optimistic on Spackman and Maintain BUY with a SGD0.22 TP (63% upside).

One-off gain turned 3Q16 into profitability. 

  • A one-off gain of USD2.13m from the disposal of Opus pictures turned 3Q16 into profitability and reduced 9M16 net loss to USD1.65m from USD4.86m.

Laying the foundations. 

  • The divestment of loss-making Opus Pictures should reduce SG&A costs significantly by c.70% and be an impetus for the company to bounce back into profitability in FY17. 
  • Its other production house, Zip Cinema Co Ltd, has a good track record and aims to produce 1-2 movies pa. Coupled with Spackman’s joint ventures (JVs) to produce other movies, these factors should spur growth going forward The movie Masters to solidify earnings turnaround. Masters is set to be released on 22nd Dec and would likely contribute to its 4Q16 NPAT. 
  • Our expectations of 7.5m in ticket sales would yield profits of USD5.6m and bring the company back into the black.

Maintain BUY with a TP of SGD0.22. 

  • We are of view that Spackman’s outlook is at its best since its IPO. The company is primed for a strong turnaround. 
  • Near-term positive catalyst would the the success of its blockbuster movie Masters which would be released in Dec. 
  • Key downside risk is the lack of earnings visibility due to the inherent nature of its business.

Jarick Seet RHB Invest | 2016-11-11
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.220 Same 0.220