Cityneon Holdings - CIMB Research 2017-08-30: Third Time Lucky With Jurassic World

CITYNEON HOLDINGS LIMITED 5HJ.SI

Cityneon Holdings - Third Time Lucky With Jurassic World

Proposed acquisition of 3rd intellectual property (IP), Jurassic World for US$25m, and US$5m profit target; to be funded by existing cash and borrowings.
We like its attractive 5x 12M forward P/E valuation, strong franchise, proven track record and new Universal Studios partnership, with secured locations for FY18F.

Cityneon (CITN) announced 100% acquisition of JP Exhibition for US$25m (S$33.8m), which holds global rights to Jurassic World Exhibition, from a group of vendors including Imagine Exhibitions, via its wholly-owned subsidiary Victory Hill Exhibitions (VHE).
This is VHE’s 3 rd IP acquisition associated with blockbuster movies after Disney’s Marvel Avengers S.T.A.T.I.O.N. and Hasbro’s Transformers Autobot Alliance, but marks the start of a partnership with Universal Studios, which may include a majority stake investment in related travelling sets for the 25th anniversary of Jurassic Park.
The deal also comes with a profit target of US$5m for the 12-month period ending 7 Jan 2018, implying 12M forward P/E of 5x. We think this is attractive, vs. CITN’s current valuation of 11.9x and the industry average of 15.8x. This IP also ties in with the family-oriented theme for CITN.

Jurassic World: The Exhibition made a 6-month stay at the Melbourne Museum in 2016, welcoming over 430K visitors (at an average ticket price of US$25). It was the museum's most popular attraction since 2011’s Tutankhamun show, according to the local Australian newspapers.
This travelling exhibit made its next stop in Philadelphia, recording total visitorship of more than 400k people (US$35 ATP) at the Franklin Institute. The temporary set has since relocated to the Field Museum in Chicago, and will be there till Jan 2018. We understand there are two more locations in the pipeline for 2018, and plans to build a 2 nd immersive experience set are underway.
Based on statistics from Box Office Mojo, Jurassic World (2015) is the 4th highest grossing box office worldwide all-time. Its sequel, Jurassic World (Fallen Kingdom), is slated for 2018 summer.

We see travelling sets as an extension of movie blockbusters, in terms of reaching out to loyal fans and enhancing the overall film franchise, by the production studios (Universal Studios, Disney, Hasbro) which also participate actively in quality control and the sourcing of local partners in the various countries the sets go to.
Such travelling sets are also often favoured by property management companies (the likes of mall operators, hotels, museums), who need diverse sources of content as a means of pulling the crowd into their locations.

We keep our FY17-19 forecasts and target price of S$1.27 (pegged to 15x FY18F P/E, 15% discount to peers’ average) intact. Maintain Add.
Greater uptake of its travelling sets is a key potential catalyst.
Downside risks to our Add call include poor content development across its three IP rights.

NGOH Yi Sin CIMB Research | William TNG CFA CIMB Research | http://research.itradecimb.com/ 2017-08-30

CIMB Research SGX Stock Analyst Report ADD Maintain ADD 1.270 Same 1.270