MM2 ASIA LTD. (SGX:1B0)
mm2 Asia - No Signs Of A Turnaround
- Huge loss in 1H FY21 as all segments of mm2 Asia affected by COVID pandemic.
- Core business is the only bright spot; cinema segment continues to bleed; no shows lined up for UnUsUaL.
- Expect steep net losses for mm2 Asia in FY21F and FY22F.
- Maintain FULLY VALUED with lower target price of S$0.13; c.50% debt due within a year is a key concern.
Huge loss in 1H FY21; all segments affected by COVID-19 pandemic
Huge loss in 1H FY21.
- mm2 Asia (SGX:1B0)'s group revenue for 1H21 plummeted by 83% y-o-y to S$19.9m, due to the adverse impact from the outbreak of COVID-19 as all the group's business segments were affected. As a result of the plunge in revenue, the group recorded huge net loss of S$22.4m, vs S$9.2m profit in 1H FY20, though EBITDA remains positive at S$6.2m.
- mm2 Asia's core business is still the only bright spot. Revenue for core business decreased by 54.4% y-o-y to S$13.4m in 1H FY21, mainly due to lesser number of projects delivered and distribution income was also affected by cinema closures during the first three months of the financial period.
- Nevertheless, mm2 Asia’s core business in content development will continue to be a key driver, with its diversified businesses, including distribution of content to platform providers, and multi-market presence to help mitigate the impact on other group businesses that have been more adversely affected by COVID-19. The group’s strategy remains focused on North Asia.
Cinema segment continues to bleed.
- As expected, the cinema segment was loss making in 1HFY21. Revenue for the cinema segment plunged by 92.7% y-o-y to S$3.6m, as its operations were temporarily closed due to directives of both the Singapore and Malaysia governments.
- The cinemas in Singapore were closed from 26 March and re-opened in mid-July with a 50-person restriction. This restriction was raised to 150 patrons from 1 October for large cinema halls with more than 300 seats. In Malaysia, cinemas remain closed in light of the Movement Control Order (MCO) to combat the COVID-19 pandemic. Hence, 1HFY21 was loss-making and we expect losses to continue at least till 2HFY22/FY23F.
No shows for UnUsUaL, except in Taiwan.
- mm2 Asia's 1H FY21 revenue for concert and event dived 96.8% to S$3.6m, as this segment did not hold any live entertainment events/concerts during 1H FY21, except for the first post-pandemic, full scale concert by Mandopop singer-songwriter Eric Chou at Taipei Arena in late August 2020. Most of the large-scale projects have been deferred to contain the spread of COVID-19. Hence, the concert segment also reported a net loss for 1HFY21.
Expect steep net losses for mm2 Asia in FY21F and FY22F.
- With the steeper than expected loss in 1HFY21, we now expect mm2 Asia's FY21F and FY22F to continue to register steep losses, and recovery only in FY Mar 2023.
- Our sum-of-parts target price of S$0.13 (prev S$0.14) is pegged to 10x FY22F earnings for mm2 Asia's core business (in line with de-rating of peers), 6x EV/EBITDA for cinema business, and current market valuations for UnUsUaL (SGX:1D1) and Vividthree (SGX:OMK).
- We could see pent-up demand for out-of-home and live entertainment after easing of COVID-19 lockdowns. But the cinema segment could take a longer time to turnaround given the suspension of business in Malaysia and the restrictions in Singapore. Furthermore, gearing for mm2 Asia remained high at 1.2x, and c.50% of the debt is due within
- See mm2 Asia Share Price; mm2 Asia Target Price; mm2 Asia Analyst Reports; mm2 Asia Dividend History; mm2 Asia Announcements; mm2 Asia Latest News.
Lee Keng LING
DBS Group Research
|
https://www.dbsvickers.com/
2020-11-16
SGX Stock
Analyst Report
0.13
DOWN
0.140
