Small Caps

Small Caps

CGS CIMB Research, March 14

Our preferred picks for the growing media/entertainment business regionally are MM2 Asia and Cityneon Holdings.

MM2 – 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. Its current market valuation (excluding Unusual and the S$230 million price tag for Cathay cinemas) appears to be pricing its core production business at only eight times CY18F price earnings, which is at a discount of almost 60 per cent to regional movie/TV production peers. Key near-term catalyst is potential spin-off of Vividthree Productions.

Cityneon – With a portfolio of three IP rights and an expanding creative team, Cityneon is on stronger footing now and remains positive on its travelling show pipeline. Its traditional business could gain from more theme park and event opportunities.

Current 12 times FY18F price earnings valuation is attractive, given three-year earnings per share CAGR (compound annual growth rate) of 20.4 per cent (our estimates) versus industry average of 17 times and 20.6 per cent (Bloomberg consensus). Winning its fourth IP – company is on the lookout for this – and stronger uptake of travelling sets could cause the stock to re-rate.

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