Excerpts from DBS analyst report

Analyst: Ling Lee Keng

Upgrade to BUY as value emerges

Value emerging; upgrade to BUY. Share price has shed 27% since our downgrade to HOLD after the release of 3QFY19 results in February.

“Though the group still needs to deleverage given the swing to 0.8x net gearing at end-FY19 and high interest expense, we believe the negatives are already priced in.

“We see value emerging at the current level with 43% upside to our revised TP of S$0.34. Upgrade to BUY.
”

At current level, we see value emerging. Based on sum of the parts valuation, and stripping out its stakes in UnUsUaL and Vividthree, the market is valuing the core production and cinema segment at only S$144m, which works out to P/EBITDA of slightly over 2x, which is too low in our view.

mm2 paid 13.8x for the Cathay cinema chain in Singapore and about 8-9x for the Malaysia cinemas while peers are trading at about 5.5x P/EBITDA.



mm2 Asia

Share price: 
24 c

Target: 
34 c

Where we differ: Slight difference in valuation peg vs consensus. We value the production segment based on PE and P/EBITDA for the cinema.

MelvinAng youtubeMelvin Ang, founder and executive chairman, mm2 Asia. Youtube screenshotFor UnUsUaL and Vividthree, we value these at current market valuation, vs PE valuation used by consensus. Potential catalyst: More projects especially in North Asia; successful cinema operation spinoff.

Valuation:
Upgrade to BUY, TP S$0.34. Our sum-of-parts target price of S$0.34 is pegged to 16x FY20F earnings for core business, in line with peers listed in Asia, 5.5x P/EBITDA for cinema business, and current market valuation for UnUsUaL and Vividthree.

Key Risks to Our View:
No long-term financing arrangements for productions. The commencement of each production is dependent on mm2’s ability to secure funding.

Unavailability of good scripts. Lack of good scripts for production may lead to less support from stakeholders.

Full report here


Share Prices

Counter NameLastChange
AEM Holdings1.000-
Alliance Mineral0.1500.005
Anchor Resources0.012-0.001
AusGroup0.026-
Avi-Tech Electronics0.260-0.020
Best World Int.1.360-
China Sunsine1.120-
CSE Global0.4850.010
Food Empire0.495-
Geo Energy0.1530.003
Golden Energy0.210-0.005
GSS Energy0.083-0.003
HMI0.6650.015
ISDN Holdings0.225-0.005
KSH Holdings0.410-0.005
Miyoshi0.0440.001
Moya Asia0.0770.002
Nordic Group0.3100.030
Oxley Holdings0.320-0.005
REX International0.073-
Riverstone1.0000.005
Roxy-Pacific0.390-
Sing Holdings0.390-0.005
SingMedical0.3950.010
Sino Grandness0.0630.021
Straco Corp.0.750-
Sunningdale Tech1.3400.010
Sunpower Group0.4800.010
The Trendlines0.077-
Tiong Seng0.230-
Uni-Asia Group0.7600.005
XMH Holdings0.1550.002
Yangzijiang Shipbldg1.500-0.020

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 947 guests and no members online