SINGAPORE (Mar 4): Four years ago, mm2 Asia went public to fund its ambition to become a regional media powerhouse. Investors were only too keen to back a scrappy underdog with big dreams. In a few short years, mm2 now has a chain of cinemas, a concert organiser, a visual effects studio and an online video platform. It makes content for East Asia and Southeast Asia, from film to TV and online content. At its peak in June 2017, mm2’s share price was up more than 12-fold from its IPO price of 25 cents.

Naturally, there is pressure to continue to grow. But some investors have lost faith in mm2 ever since the company failed to buy a 50% stake in the local cinema business of Golden Village, the largest cinema chain in Singapore, with a 39% market share. Instead, it acquired the Singapore operations of Cathay Cineplexes, which had a 27% market share, for $230 million, or 13.8 times earnings before interest, taxes, depreciation and amortisation (Ebitda), more than what it paid for the cinemas in Malaysia and what it wanted to pay for the 50% stake in Golden Village cinemas.

So far this year, mm2 has shed 12.5% of its value, closing at 28 cents on Feb 27. Now, observers are worried about the debt incurred from its latest cinema acquisition, whose lower operating margin is a drag on mm2’s overall Ebitda margin. There are calls for the production house to take a long hard look at its cinema business — spin it off, possibly — and deleverage.

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