mm2 Asia cut to 'hold' by Maybank despite latest box office showing

mm2 Asia cut to 'hold' by Maybank despite latest box office showing

PC Lee
26/03/19, 11:46 am

SINGAPORE (Mar 26): Maybank Kim Eng would rather wait for mm2 Asia’s cinema division to make disclosures in its fiscal-year-end reporting before changing its forecasts.

Good showing at the box office by mm2’s latest movie “More Than Blue” has led to another tie-up with Fox Networks Group Asia which has likely driven the stock’s recent re-rating.

Unfortunately, mm2’s Cathay cinema acquisition “has clouded all interim visibility of its production business and overall prospects” due to leverage.

And although upcoming fiscal-year results could provide visibility of all parts, this would be followed by a nine-month revenue fog unless management enhances interim disclosures, says Maybank.

“We think optimism has been priced in and downgrade the stock to ‘hold’ from ‘buy’. Maintain our 1x PE-based target price of 34 cents,” says analyst Luis Hilado in a Monday report.

Although mm2 itself is not an investor in “More Than Blue”, the company stands to gain from 8-12% producer bonus fees from any hits, says the analyst.

What the market is anticipating though are gains more proportionate to the $66 million box office grossed by the movie over its first weekend in China.

Hilado also notes that mm2 has entered into a $115 million refinancing facility that could lower its future interest expenses.

In practice, by focussing on production rather than film investments, mm2 can be insulated from earnings volatility, in either direction.

In theory, the more hits mm2 produces would burnish its reputation and help it bag future production work from global players – hence, its recent Netflix and Fox production deals.

“We continue to view its content-production business favourably, supported by a healthy pipeline. Big-screen content risks due to changing - and a new generation of - viewer habits remains a perception issue, hence more content for streaming could be essential,” says Hilado.

As at 11.42am, shares in mm2 Asia are trading 0.5 cent lower at 31 cents.

Right timing: STI’s upclimb supported by momentum and moving averages

SINGAPORE (Apr 20): There has been little change in the trend and chart pattern of the Straits Times Index. The index has been on a very glacial ascent towards 3,420, the target indicated when the index broke out of resistance at 3,190 in mid-Jan. Quarterly momentum eased during the past four trading sessions. The 100- and 200-day moving averages have turned positive. This coupled with positively placed DIs and rising ADX should continue to underpin the STI. The only cautionary signals are the somewhat overbought levels of short term stochastics and 21-day RSI, and stagnant vol....

SMI takes legal action against Hyflux; Maybank moves on Tuaspring

(Apr 20): SM Investments (SMI) has terminated its rescue agreement with Hyflux, it announced on Friday. Hyflux, on its part, had already on April 4 terminated the same agreement with SMI. SMI claims it has thus far abided by the agreement. “To clarify, SMI does not accept the purported termination of the Restructuring Agreement by Hyflux on 4 April 2019. This is because the termination was not in accordance with the terms of the Restructuring Agreement," said SMI. Under the agreement reached last October, SMI, led by Indonesian tycoon Anthoni Salim, was to have invested $530 million in....

CCT reports 3.8% higher 1Q DPU of 2.20 cents on higher property contributions

SINGAPORE (April 19): The manager of CapitaLand Commercial Trust (CCT) has reported a 1Q19 distribution per unit (DPU) of 2.20 cents, rising 3.8% y-o-y from 2.12 cents due to higher contributions from Gallileo and Asia Square Tower 2. Gross revenue and net property income (NPI) for the quarter increased by 3.5% and 3.4% to $99.8 million and $79.8 million, respectively. This comes after booking contributions from Gallileo – an office building in Frankfurt, Germany which the trust acquired a 94.9% stake in during June 2018 – as well as higher occupancy at Asia Square Tower 2, both of w....