mm2, Cityneon, Unusual, KMEN.
■ mm2’s core production business is currently priced at 60% discount to peers’ average of 21x FY18F P/E. We also see earnings growth potential in all its other segments.
■ We like Cityneon for its strong IP portfolio, growth prospects and attractive valuation.
■ Unusual is a proxy for increasing global demand for live events, in terms of product offering and geographical reach.
■ We keep Kingsmen Creatives (KMEN) on our radar for NERF delivery and foray into IP business.
Singapore is boring? We beg to differ
Singapore Tourism Board’s (STB) recent video featuring some of Singapore’s most popular sights and activities was a tongue-in-cheek response to the Time Out survey that ranked the country second last on the list of “most exciting cities”. We give six reasons why we think Singapore is fun, and also highlight four listed names with the relevant exposure and potential to ride on the growing media/entertainment business regionally. Our preferred picks for this sector are mm2 and Cityneon.
mm2 - poised for regional media boom
Apart from increasing production budget and higher contribution from its cinema and concert segments, we believe its post-production segment is primed for the next growth phase, after securing the “Train to Busan” intellectual property (IP) right to develop into touring shows. At the current valuation, we think the growth prospects of mm2’s core production business and potential synergies across the different segments may have been overlooked. Key near-term catalyst is potential spin-off of Vividthree Productions.
Cityneon - transformation underway
With a portfolio of three IP rights and an expanding creative team, we think Cityneon is on stronger footing now and remain positive on its travelling show pipeline. Its traditional business could gain from more theme park and event opportunities. We think its current 12x FY18F P/E valuation is attractive, given 3-year EPS CAGR of 20.4% (our estimates) vs. industry average of 17x and 20.6% (Bloomberg consensus). We think winning its fourth IP and stronger uptake of travelling sets could cause the stock to re-rate.
Unusual Limited - entertainment galore
We expect the number of concerts/events by Unusual (UNU SP, Not Rated) to more than double over 2018-19F, from historical average of 12-15 p.a., on the back of its penetration into North Asian cities and a new product line called “Disney on Ice”. By leveraging on its listing status, regional network and technical expertise, Unusual could broaden its product offering and clientele reach, benefiting from the continuing global demand for live events.
Kingsmen Creatives - awaiting NERF ammunition
Compared to its abovementioned peers, Kingsmen Creatives (KMEN SP, Not Rated) is under-covered and has underperformed in recent years due to rising competition and soft retail spending. Management sees opportunities for order book expansion (S$84m at end-Jan 2018) and plans to diversify into location-based entertainment. Its partnership with Hasbro on NERF licensing may be the first of more IPs, with fees for content development, set construction and attraction management forming a new income stream. (Read Report)
Source : CGSCIMB Research