Cityneon Holdings - DBS Research 2017-11-24: Building Growth Platform

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CITYNEON HOLDINGS LIMITED 5HJ.SI

Cityneon Holdings - Building Growth Platform

• On stronger footing for growth with a broader IP platform.
• Full schedule for Jurassic World till 2019; second set in the pipeline. Avengers and Transformers doing well.
• Assume six exhibition sets for FY17F and nine in total for FY18F and FY19F.
• Maintain BUY; TP S$1.45.

On stronger footing with the acquisition of a third IP. 

• With the acquisition of Jurassic World, Cityneon is now on a stronger and firmer growth path. Together with the two existing Intellectual Property rights (IPs) – Avengers and Transformers - Cityneon has added a third growth leg, to help propel the group to even greater heights. 
• We continue to expect Cityneon to deliver explosive FY16-FY19F EPS CAGR growth of 165%. Trading at a low PE-to-growth ratio of 0.2x FY18F earnings, Cityneon is attractive to investors seeking unique ideas in the entertainment industry.

Where we differ: Assuming more travelling sets. 

• Including the new Jurassic World, we now assume six exhibition sets for FY17F (four for Avengers, one each for Transformers and Jurassic World) and nine sets for FY18F and FY19F (five Avengers, two each for Transformers and Jurassic World), vs consensus of five sets for FY17F and seven sets for FY18F.

Potential catalyst: 

• An expanding project pipeline, and focus on higher-margin projects for the Traditional business are catalysts.

Valuation

Maintain BUY; TP S$1.45. 

• Our earnings forecast is based on six exhibition sets for FY17F and nine in total for FY18F and FY19F. We have assumed the construction of an additional Jurassic World travelling set in FY18F. 
• Our target price of S$1.45 is based on PE valuation peg of 14.4x, which is at a 20% discount to peers’ average PE of 18x on FY18F earnings.

Key Risks to Our View

• VHE’s limited track record. Victory Hill Exhibitions (VHE) was formed in 2012 and its first exhibition was held in New York in 2014.
• Earnings dependent on number of visitors, especially for the permanent set in Las Vegas.

Lee Keng LING DBS Vickers | http://www.dbsvickers.com/ 2017-11-24

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.450 Same 1.450