SINGAPORE (Apr 23): Maybank is initiating coverage on media and entertainment conglomerate mm2 Asia with a “buy” and a target price of 56 cents.
In a Sunday report, analyst Luis Hilado says, “We believe mm2 is on the cusp of a healthy growth phase, backed by its media and entertainment acquisitions in the past 12 months.”
Currently, mm2’s film and event production and distribution businesses are in their early stages of expansion in North Asia and its recent acquisition of Cathay cinema should provide recurring cash flows despite its lower EBITDA margins.
See: mm2 Asia in option agreement to acquire Cathay Cineplexes for $230 mil
The acquisition should also provide visibility of potential competing films for its film-production business.
“We expect its film and event businesses to underpin a group revenue CAGR of 29% in FY18-21E,” says Hilado.
The group’s execution is a principle risk in its regional expansion, as well as for the analyst’s growth forecast.
The group’s pipeline visibility is constantly in flux, but it will be capitalising on its senior management’s expertise, extensive experience and relationships to create business opportunities. Its film-business focus has been shifting to North Asia, where nearly half its segmental revenue came from in FY17, up from 14% in FY15
The analyst believes that the stock is trading at a reasonable price at 22.8 times FY18 earnings and 18.3 times FY19 earnings, which are not demanding against Asian movie and entertainment companies.
As at 1.02pm, shares in mm2 are trading at 49 cents with a FY18 price-to-book ratio 2.9.
