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June 28, 2016
Consu
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gapore
THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH (PTE) LTD.
SEE PAGE 27 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Co. Reg No: 198700034E MICA (P) : 099/03/2012
Simeon Ang [email protected] (65) 6231 5927
mm2 Asia (MM2 SP)
Now Showing: The Upstart
Budding media entertainment company
mm2 Asia is a service provider in the USD14.1b Asian film industry. Its
expertise lies in the production and distribution of films in Singapore,
and Malaysia.
Group has been looking to establish an expanded foothold in the Greater
China region through strategic working relationships in China, Hong Kong,
and Taiwan. At the same time, management is undertaking M&As to
transform the company into a more holistic media entertainment group.
with non-speculative revenue streams…
Production accounted for 57% of FY16 revenue with producer fees
forming the bulk of the business arm’s contributions. These fees are
almost guaranteed to be received once film production goes ahead.
Hence, potential losses stemming from poor box office receipts are
substantially, if not, completely mitigated. Average producer fees per
film amounts to about SGD1.5m with Chinese films generally offering
higher fees. Management shared that it expects to produce about 20
films in FY17 (FY16: 14).
Filling a SGD17m funding gap
With only SGD4.7m in cash reserves and SGD4.8m in unutilised
Orientivity proceeds, mm2 will need to raise more funds to fuel its
ambitions and plug a ~SGD17m funding gap for its recent acquisitions.
In light of its track record and current debt burden (8.2% of equity), still
considered light by industry standards (11%), mm2 could seek funding
through a combination of debt (higher interest costs), equity through
private placements (dilution) as well as a possible UnUsUaL stake sale.
Current valuations foretell growth prospects
Based on consensus estimates, mm2 is trading at a 9% discount to its
peers despite its growth profile which is backed by an ROE of 30%. mm2
is also one of a handful of profitable publicly-listed film producers and
should see earnings scale up quickly if the company is able to establish a
foothold in new markets.
The street has 1 Buy and 1 Hold call on the counter with consensus TP of
SGD0.74.
Share Price SGD 0.67
Not Rated
Company Description
Statistics
52w high/low (SGD)
3m avg turnover (USDm)
Free float (%)
Issued shares (m)
Market capitalisation
Major shareholders:
52.2%
4.0%
2.8%
502
1.2
mm2 Asia Ltd. operates as an investment holding
company, which engages in the motion picture, video
and television program and production activities.
ANG WEE CHYE
Phillip Asia Pacific Opportunity Fund Pt
YEO KHEE SENG BENNY
0.70/0.26
41.0
SGD333.9M
USD245M
Price Performance
0
100
200
300
400
500
600
700
800
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
0.800
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
mm2 Asia - (LHS, SGD) mm2 Asia / Straits Times Index - (RHS, %)
-1M -3M -12M
Absolute (%) 6 28 192
Relative to index (%) 8 33 256
Source: FactSet
FYE Mar (SGD m) FY12A FY13A FY14A FY15A FY16A
Revenue 7 10 16 24 38
EBITDA 0 2 7 10 19
Core net profit 0 1 3 5 8
Core EPS (cts) 0.0 0.0 1.3 2.5 1.8
Core EPS growth (%) na na nm 85.5 (24.8)
Net DPS (cts) 0.0 0.0 0.0 0.0 0.0
Core P/E (x) nm nm 50.2 27.0 36.0
P/BV (x) nm nm 37.7 7.2 8.1
Net dividend yield (%) 0.0 0.0 0.0 0.0 0.0
ROAE (%) 226.8 165.8 120.6 44.5 29.5
ROAA (%) 5.8 12.0 19.7 18.5 15.3
EV/EBITDA (x) na na na 2.1 12.4
Net debt/equity (%) 141.5 5.7 16.6 net cash net cash
Retail Research
June 28, 2016 2
mm2 Asia
1. Investment thesis
1.1 Lights, camera and action
mm2 is a local film producer and distributor. These two core business
segments account for more than 72% of FY3/16 revenue. Production
revenue (57% of revenue) is mainly derived from producer fees and
bonuses*. In FY16, it produced 14 films (FY15: 9 films), which underpinned
the segment’s revenue of SGD22m (+45%).
Distributorship formed 16% of revenue, mainly from the nine films mm2
distributed in FY16. Owing to the nature of the business, contributions can
be quite volatile as evidenced by the spike in FY15’s performance to
SGD7.5m due to a box office hit, Ah Boys To Men 3.
The third key revenue component is sponsorship commissions (6%), which
are generally earned when mm2 secures corporate sponsors for specific
films. Historically, mm2 receives ~15% commission of the total sponsorship
amount. Sponsorship revenue doubled to SGD2.1m in FY16 (FY15:
SGD1.1m) due largely to sponsorship dollars received for a film-event held
in China.
The three segments have performed well over the past few years,
supporting revenue CAGR of 32.4% over FY13 to FY16. In FY16, revenue
growth came primarily through inorganic means (60%), with its core
contributing to remaining growth. Beyond FY16, management has
articulated a growth plan that entails expanding into the cinema and
events businesses.
1.2 Key growth strategies
mm2’s growth strategy is based on its strategic goal to be a holistic
content company with capabilities in production, distribution, and
exhibition across the Asia Pacific.
1. Expanding in the Greater China region and into the US
Having established its film production and distribution network in
Singapore and Malaysia, mm2 is currently expanding its footprint in the
Greater China region with an eye looking towards the US market as well.
The two regions generally boast larger markets where movie-goers are
also becoming increasingly more discerning in what content they
consume. This naturally dictates a larger production budget, which could
translate to higher production fees. Additionally, the US film industry
allows for larger producer bonuses, which are about 2.5x more than that
in Asia.
2. Building blocks for a holistic entertainment group
In a short span of only five months, its two newly acquired Malaysian
cineplexes generated maiden revenue contributions of SGD4.9m,
accounting for about 13% of its total FY16 revenue mix. With the addition
of another three cinemas in Malaysia this year, this business arm is
expected to be a key growth driver in the quarters to come.
3. Synergies from proposed stake in UnUsUaL
Another growth avenue could come from its 51% stake acquisition of the
UnUsUaL group of companies. The acquisition deal (of SGD26m) was
valued at a PE of 10.2x and is based on UnUsUaL attaining net profit
targets of SGD5m for each of the next three years. Management believes
that synergies can be reaped, particularly with the concert organiser’s
ability to network with well-known global/regional artistes such as
Michael Buble, A-mei, and Andy Lau.
*A producer bonus is received if the film does exceedingly well at the box office. In such cases, the producer will be able to receive a bonus of about 10-20% of the profit payout received by the investors of
the film.
June 28, 2016 3
mm2 Asia
1.3 Risks
Earnings risks may stem from production delays and cost overruns. In such
cases, mm2 will have to make up for the shortfall. However, thus far, its
core business has not yet been materially affected by such delays and
overruns.
Another risk is mm2’s transition from a previously asset light model to a
more asset heavy model as it expands downstream towards the end
consumer through cinema operations. This requires relatively heavy capex
and additional expertise. Currently, we note that mm2 has a ~SGD17m
funding gap that has risen from its recent acquisitions. mm2 will likely
seek funds through debt (higher interest costs) and equity (dilution)
markets.
The other main risk arises from an inability to grow its production pipeline
either due to: 1) a dearth of good scripts/content 2) loss of support from
investors (both private and public), and sponsors to invest in the
production budget 3) inability to secure third parties (directors,
production crews, etc) to make the film.
Figure 1: SWOT Analysis
Source: Company data, Maybank Kim Eng
Strength Weakness
Highly scalable as it operates an asset light model whereby the main filmmaking processess
are outsourced to third parties
Absence of long term, stable investor pool implies some volatility in investor makeup of
specific films
Producer fees are factored into the production budget, hence it is relatively immune to box
office performance
Unable to forecast pipeline for more than 18 months ahead due to changing media landscape
and consumer preferences
Established network of business relationships with an executive management team that has
cumulative experience of 117 years
Commercial success of films is never guaranteed as even established franchises can lead to
box office flops
Opportunities Threat
Expansion into the Greater China region provides for larger production budgets and thus
fatter margins
Web-exclusive content published over OTT platforms stealing eyeballs away from the
traditional film industry
Grassroots and government support for locally made films can help boost production pipelineThreat of licence revokation/debarment due to content deemed too sensitive for specific
markets, e.g highly regulated markets like China
Access to popular artistes in the industry through its 51% stake in UnUsUaL Group Departure of key management personnel
Potential spinoffs of various business arms to realise value Failure to realise synergies from recent acquisitions
June 28, 2016 4
mm2 Asia
2. Corporate Information
2.1 Company background
Since mm2’s founding in 2008, the group has produced a portfolio of over
50 films across various genres including comedy, drama, horror, action,
and romance. Throughout the filmmaking process, mm2 derives income
from the production, distribution as well as commissions from
sponsorships that it successfully wins for specific films.
It currently has subsidiaries in Singapore, Malaysia, and Hong Kong with
representative offices in Shanghai, Beijing, and Taiwan.
2.2 Competitive advantages
mm2 essentially acts as a middleman and project manager in the film
production industry, bringing together the various stakeholders in any
particular film and ensuring that production proceeds according to plan.
Its competitive advantage thus lies in its ability to provide services to
stakeholders throughout the production process and to derive revenue
from such services.
1. Pre-production: Sponsorship commissions, producer fees, script fees
2. Post-production: Distributor fees, exhibitor fees
3. Post-box office closure: Producer bonuses (if any)
Another advantage that mm2 possesses lies in its local offices that are
currently staffed with experienced locals. This provides it will the ability
to identify commercially viable content in various markets.
mm2’s chief executive, Melvin Ang, was previously Managing Director at
Mediacorp and has had experience working with his Chinese counterparts
when co-producing content. Notably, he was MD when Mediacorp
witnessed the signing of several Singapore-China film projects worth
SGD23m.
Lastly, mm2’s content have generally been quite niche and independent,
steering it clear away from the big boys which remain focused on
established scripts and content franchises.
2.3 Business vision
mm2’s vision is to become a regional one-stop studio for filmmaking with
its acquisitions so far being opportunities that are complementary to its
current businesses.
Through its current pipeline, its focus is on expanding its overall business
relationships with leading regional studios for more co-production and
distribution business opportunities.
June 28, 2016 5
mm2 Asia
2.4 Business value chain
Source: Company, Maybank Kim Eng
June 28, 2016 6
mm2 Asia
3. Business Strategy
3.1 Growing its core film franchise
With its current portfolio of over 50 films, mm2 has substantial film
pipelines in Singapore and Malaysia. To expand this franchise, mm2 will
have to leverage on its core competitive advantages as well as the
business relationships that it has cultivated thus far.
3.1.1 Expansion in Greater China to propel film
making & distribution
mm2’s traditional markets have largely been concentrated in Singapore
and Malaysia. Although its current film production and distribution
businesses have reaped growing profits thus far, the universe of film
production in these traditional markets appears to be stagnating despite
government support. This could be due to a myriad of reasons including
but not limited to:
1. Scarcity of content with local-appeal
2. An immature film industry
3. Censorship laws
4. Limited investor pool due to relatively smaller domestic audience
Figure 2: Number of local films produced in Singapore & Malaysia
Source: MDA, FINAS, Maybank Kim Eng
In light of this, mm2 sees the need to expand into the Greater China
region (Mainland China, Hong Kong, and Taiwan) as well as in the US.
To be sure, mm2 already has a significant footprint in the region with film
releases such as its 2014 Chinese production, 中国好声音之为你转生.
To further expand its footprint, mm2 intends to leverage on its strong
business relationships with key industry players in Hong Kong, Taiwan, and
China that have been cultivated since it made its initial forays into those
markets. Two main factors come into play with regards to its push into
Greater China (GChina) region.
1. Its experience working with the Malaysian and Singaporean
governments for grants to fund production budgets has provided
management with some exposure in government negotiations -
June 28, 2016 7
mm2 Asia
complementary skills that will be useful in negotiating with authorities in
the GChina region particularly when pushing for government grants.
2. Individual business connections and relationships would be the main
driving force for its push to expand in the GChina region. In particular,
CEO Melvin Ang as well as Hong Kong executive director, Wong Sing are
key to this push.
Aside to Mr. Ang, Wong Sing, known more commonly as 夏雨, has been in
the media industry in Hong Kong since 1962, winning multiple accolades
for his roles in Hong Kong film. This has allowed him to build strong
industry connections which would serve mm2 well as it pushes into the
region.
In 2015, North American and China box office receipts grew 8% and 49% to
USD11.1b and USD6.8b respectively. According to the MPA, the
addressable box office industry in North America and China is estimated at
USD17.9b or 46% of the global industry pie.
Figure 3: World gross box office receipts
Source: MPA International
Not only does mm2 aim to position itself as a GChina film producer but
one that also owns distribution networks & channel capabilities in SE Asia.
To date, mm2 has produced most of its films in Singapore & Malaysia but
the mix will change from 2016 where over 40% of films will be produced
outside of the Straits region. To this effect, mm2 has made explicit that it
will produce 49% of its total film pipeline in the GChina region over the
next 18 months.
10.2 10.8 10.9 10.4 11.1
9.010.4 11.1 12.4
14.1
13.413.5 13.9 13.6
13.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2011 2012 2013 2014 2015
US$
'b
Rest of International Asia Pacific US/Canada
June 28, 2016 8
mm2 Asia
Figure 4: Film production order book from Apr ’16 – Sep ‘17
Source: Company data
Aside from producing more films in China, mm2 has also been able to
enlarge its overall pipeline of films that it produces annually for the past
four years. At last update, management guides that mm2’s production
pipeline for FY17 is about 20 versus FY16’s 14.
The expanded pipeline was achieved through mm2’s ability to, 1) source
for satisfactory scripts/content, and 2) fulfil production budgets.
Figure 5: Films produced
Source: Company data
June 28, 2016 9
mm2 Asia
3.1.2 A beachhead to the US
The same motivation applies for the USD11.1b (2015) US film industry
where film budgets and producer bonuses are typically larger than what
Asia can offer.
In 2016, mm2 entered its first US co-production with BoulderLight
Pictures* to produce “Good Match”, a contemporary thriller about a
bachelor who meets a seemingly perfect match via a social dating app.
While the production budget is considered relatively small at USD0.4m,
the film could open opportunities for other films if the initial project is a
success. The film is slated for launch in 2017.
3.1.3 Building a pool of content investors
Content investors are essentially equity stakeholders in a specific film.
They are one of the most important stakeholders in the film production
process, without whom, the production budget cannot be funded.
mm2 has always relied on its network and business relationships to secure
such stakeholders. But this funding strategy changed in 2015 when several
high profile parties made public their commitments to invest in mm2
productions.
These include:
1. StarHub – Working with mm2 to secure advertisers and other investors
to produce up to SGD25m worth of original Singapore content over a
three-year period
2. Government support – Various government grants from Singapore,
Malaysia, Hong Kong, and Taiwan to fund locally produced films.
Notably, management shared that films produced in Taiwan are not
subject to China’s annual overseas film quota (2015: quota of 44
movies).
mm2 recently signed an SGD8m partnership with the MDA to develop
and train local Mandarin scriptwriters. Although this will have no
direct impact on mm2’s financial performance, the partnership helps
to train aspiring scriptwriters with mm2 having the first look-through
at the content produced.
Promising content can then form the basis of future production
projects to bolster its pipeline.
3.1.4 Content distribution
In film distribution, the business model is to bid for and distribute film
titles that will be well-received by the public. mm2 has teamed up with
Clover Films to jointly acquire the distribution rights for 19 films versus
the nine films it distributed in FY16.
Distribution fees from the films will be shared with Clover Films on an
evenly split basis.
Among the 19 titles are five films that are noteworthy for the star power
of the key acting cast.
*BoulderLight Pictures is a US-based independent film production house with various Video-On-Demand and film festival hits like Contracted, and Dementia. Prior to working with mm2, BoulderLight signed a financing deal with Hong Kong’s Making Film Productions to finance three films
with low-seven figure budgets.
June 28, 2016 10
mm2 Asia
Figure 6: Sample of FY17 distribution titles
Source: Company data, Maybank Kim Eng
Another way in which mm2 is looking to expand its distribution business
arm is through serial dramas. In May ’16, the group announced that it
licensed the original story rights of My Love, Farewell (安娜的爱人) that it
currently holds, to China’s Shanghai Man Man Er Culture and Broadcast. As
part of the agreement, mm2 will act as the global distributor of the 35-
episode serial drama upon completion of RMB70m production.
3.1.5 Sponsorships to pick up
While growth in this segment has not been particularly strong over the
past three years, industry trends suggest that this pie can be enlarged
dramatically particularly with increased management emphasis. Already,
we have seen sponsorship revenue pick up in FY16 to SGD2.1m (+99%).
With commissions being roughly 15% of the sponsored amount we know
that sponsorship packages have jumped substantially from SGD2.4m in
FY13 to about SGD14.1m in FY16, implying a 4-year CAGR of 56.4%.
Success stories are aplenty and could serve as a benchmark for future
performance. These include sport shoes (Heirs) and fast food restaurants
(The Prime Minister and I) in drama serials (See pictures on right) as well
as brands of beer in films. A standout sponsorship package is the reputed
USD45m sponsorship deal by Heineken for the James Bond film, Skyfall.
That amount covered about a third of the film’s total budget.
3.2 Completing the value chain to complement
growth
Beginning 2015, mm2 embarked on an acquisition spree into other
verticals with the aim of upgrading its film producing capabilities and
distribution channels. mm2’s acquisitions include the following:
i. 51% stake in Vividthree Productions for SGD1.3m (Completed in
May ’15) – Vividthree is a 3D animation and visual effects
company
ii. Two Cathay Cineplexes in Malaysia for RM40m cash (Completed in
Nov ’15)
June 28, 2016 11
mm2 Asia
iii. Three Mega Cinemas for RM22m (RM17m in new shares, RM5m in
cash) – To be completed in 1HFY17
iv. 51% stake in concert organiser, UnUsUaL Group for SGD26m
(SGD10m in cash with the remaining either in cash or new shares)
– To be completed in FY17
Of the four acquisitions totalling ~USD35m, 43% was allocated to
cineplexes and 54% to events management.
Figure 7: Capital outlay for acquisitions
Source: Company data
3.2.1 Post Production - Expanding upstream capabilities
While management guides that Vividthree Productions’ revenue
contributions are expected to be stable, mm2’s 51%-owned subsidiary
could be looking to produce its own content/intellectual property.
This can take the form of animated characters for shorts or a full
animated feature film which could then go on to boost mm2’s overall
production pipeline.
3.2.2 Cinema Operations - Completing the chain
In FY16, mm2 booked five months’ worth of revenue from two cineplexes
that it acquired from Cathay. The group is in the midst of acquiring
another three cinemas in Malaysia with deal completion expected by
1HFY17.
With the cinema chain, mm2 will now be in a strong position with turnkey
capabilities in film production, distribution, and content exhibition.
Currently, film producers in that region have to rely solely on the strength
of their content when pitching to exhibitors. Exhibitors tend to err on the
side of caution when choosing films because the selection of films it
exhibits carries with it opportunity (limited screens with wide selection of
films) and operational costs.
While established film franchises such as Star Wars, The Avengers and
local franchises such as Ah Boys To Men do not face such pressures, films
with no prior or related franchise might struggle particularly if the film
does not have significant star power.
June 28, 2016 12
mm2 Asia
With its own cinemas, mm2 is able to ensure that such films it produces
has firm exhibition slots that it can then use to either: 1) market its own
films and 2) pitch to other exhibitors when those films do well at its
cinemas.
Cinema operations also help to provide a relatively stable and recurring
revenue stream for the company with box office receipts in Malaysia
growing at a steady pace.
In essence, the acquisitions are part and parcel of mm2’s overall drive to
be a holistic media entertainment group.
Notably, the two cineplexes are punching above their weight with their
share of box office receipts on a national level exceeding their screen
market share.
3.2.3 Not an UnUsUaL pairing
mm2 recently proposed the acquisition of a 51% stake in the UnUsUaL
group of companies. The acquisition deal (of SGD26m) was valued at a
forward P/E of 10.2x which is based on UnUsUaL attaining net profit
targets of SGD5m (FY15: SGD4.7m) for each of the next three years.
More recently, mm2 announced the proposed listing of the group on the
Catalist board which could ultimately unlock further value from its stake
and boost its own valuations.
However, initial earnings contributions from its stake in the group
(~SGD2.6m/year) could be diluted due to the IPO if mm2 does not take up
new shares or if it sells vendor shares.
Aside, management believes the main synergies to be reaped are the live
event producer’s ability to network with well-known global/regional
artistes such as Michael Buble, A-mei, and Andy Lau.
The ultimate goal is to cast UnUsUaL’s network of artistes in mm2’s
content production.
3.2.4 Developing OTT platform to capture eyeballs
With consumers demanding faster and on-demand access to content, mm2
recognises that end-users will desire platforms that have anywhere,
anytime access to content. mm2 is thus working with its 51%-owned
subsidiary, Millinillion, to develop an over-the-top* (OTT) platform that
will allow it to bring content directly to the end user in an effort to
capture and convert eyeballs.
Millinillion is a tech start-up which specialises in developing Business-to-
Consumer (B2C) mobile applications and digital interactive solutions for
clients.
Management guides that the content it intends to deliver on such a
platform can be as varied as media seen on popular social websites such
as Facebook, Instagram, and Youtube. These include:
1. Films/content it produces
2. Third party content
Again, the aim of this platform would be to make it as sticky as possible
to end users. Hence, the variety and availability of on-demand content
could be the next growth frontier for the group.
*Over-the-top content is the delivery of audio, video, and other media
over the Internet.
June 28, 2016 13
mm2 Asia
4. Financial Analysis
Figure 8: Historical financials
Source: Company data, Maybank Kim Eng
4.1 Revenue mix
mm2 currently derives revenue from:
1. Production of content
2. Distribution of content
3. Sponsorship commissions
4. Post-production – 3D animation & visual effects
5. Cinema operations
As at FY16, the group welcomed the maiden contributions of Vividthree
Productions (Post-production) as well as two Cathay Cineplexes (Cinema
operations). Figure 9 & 10 shows a breakdown of the various segments in
its most recent FY16 results.
June 28, 2016 14
mm2 Asia
Figure 9: Revenue composition, FY16
Source: Company data
Figure 10: Geographical composition, FY16
Source: Company data
4.2 Core segmental performance
Figure 11: Production revenue & gross margin
Source: Company data
Figure 12: Distribution revenue & gross margin
Source: Company data
Figure 13: Sponsorship revenue & gross margin
Source: Company data
Production57%Distribution
16%
Sponsorship5%
Post Production9%
Cinema13%
Singapore64%
Malaysia8%
China19%
Taiwan5%
Hong Kong4%
Others0%
Singapore64%
Malaysia8%
China19%
Taiwan5%
Hong Kong4%
Others0%
6.4
15.0
21.731%
56%57%
0%
10%
20%
30%
40%
50%
60%
0
5
10
15
20
25
FY14 FY15 FY16Production revenue ($ 'm) Gross profit margin (%)
6.57.5
6.0
30%
9%
3%
0%
5%
10%
15%
20%
25%
30%
35%
0
1
2
3
4
5
6
7
8
FY14 FY15 FY16Distribution revenue ($ 'm) Gross profit margin (%)
2.8
1.1
2.1
41%
48%
24%
0%
10%
20%
30%
40%
50%
60%
0
1
1
2
2
3
3
FY14 FY15 FY16Sponsorship revenue ($ 'm) Gross profit margin (%)
June 28, 2016 15
mm2 Asia
4.2.1 Content production (Upstream)
mm2 obtains income from various stages of the production process. This
includes:
- Producer fees (10-20% of total production budget)
- Script rights (>10% of production budget)
- Producer bonuses (if box office is a hit, mm2 gets ~10% cut of the net
payout)
Because of the nature of these fees, production revenue is thus a function
of both the number of films in its production pipeline as well as the size of
the production budget.
The larger the budget, the higher the absolute amount of producer fees
and script rights which in turn translate into stronger revenue growth
rates.
mm2’s total production budget jumped almost two-fold from SGD11.5m to
about SGD25m in FY16.
Compared to Singaporean productions, film productions in the GChina
region provide for larger production budgets.
This revenue segment is highly scalable as each producer can be seen as a
project manager who essentially connects relevant parties and ensures
that the production process adheres to specific timelines and costs. Once
these are planned out, the producer can move on to the next project
while keeping tabs on the initial one.
In this way, a single producer can take up to two films at any one time
depending on personal commitments and drive. With this in mind,
management highlighted that current utilisation of its human resources
(~40 pax) is under 50%, indicating a large potential for taking on more
film projects.
4.2.2 Content Distribution (Downstream)
The next most important mainstay of its revenue performance comes from
its distribution networks. Essentially, mm2 earns fees when it distributes
films produced by itself or third parties.
These distribution networks can take the form of big and small screens,
both local and overseas as well as cable and free-to-air television. Other
distribution avenues include physical media, airline entertainment
systems, etc.
According to management, distribution commissions typically amounts to
about 7.51% of the film’s box office receipts.
Again, this revenue stream is relatively assured as it is a fixed percentage
of total box office receipts. Despite this, some revenue volatility may be
experienced if box office receipts are poor or on the flip side, very good.
Runaway successes at the box office have characterised strong distribution
growth particularly from FY13-FY14 (+7.3%) and FY14-FY15 (+16.1%),
partially attributable to the success of the Ah Boys to Men franchise.
In total, the Ah Boys to Men franchise grossed SGD21.7m in Singapore box
office receipts alone, the highest of Singapore movie franchise.
June 28, 2016 16
mm2 Asia
4.2.3 Sponsorship commissions
Currently, commissions from sponsorships do not contribute a lot to
mm2’s revenue performance with FY16 contribution only at 6% or
SGD2.1m (+99%). Typically, commissions are about 15% of the sponsored
amount.
The ability to secure such sponsorships rests on: 1) mm2’s business
relationships and networks, and 2) the film’s genre and marketability.
Based on past movies, mm2 has been able to secure sponsorships from
companies such as KPMG and StarHub.
Sponsorships help to achieve two goals, the first being form a revenue
standpoint and the second being the fulfilment of the production budget.
Having a large sponsor on board means mm2 spends less time and
resources to source for more investors.
4.2.4 Post Production (Upstream)
The first of two new business arms, the post production business revolves
around its 51% stake in Vividthree Productions which specialises in 3D
animation and visual effects for feature films and commercials. For FY16,
the business arm contributed SGD3.6m or slightly more than 9% of total
revenue.
Vividthree is one of the top players in the field and has a notable portfolio
of past projects which include both Singaporean (Ah Boys To Men
franchise) as well as Hollywood films (Robotropolis/Battle of the
Damned).
4.2.5 Cinema operations (Downstream)
In FY16, mm2 also saw the maiden contributions of two cineplexes
(Cathay) which provided five months’ worth of revenue amounting to
SGD4.9m or about 13% of total revenue. As a guide, about 50% of gross box
office receipts are reported as revenue for each cinema.
In addition, the operations will also see inflow from the sale of other F&B
products such as popcorn and soft drinks.
The two cineplexes, located in Johor Bahru and Selangor, Malaysia, were
previously branded under the popular Cathay brand and boast a combined
30 screens with 5,298 seats in total. To put things into perspective, these
screens make up slightly more than 3% of Malaysia’s total number of
screens as at 2015 (944 screen).
June 28, 2016 17
mm2 Asia
Figure 14: Malaysia gross box office & attendance
Source: FINAS
Contributions from this segment are expected to perform roughly in line with the
growth of Malaysia’s overall box office (2015: RM869.1m, +14% YoY; 5-year CAGR
of 9.6%).
June 28, 2016 18
mm2 Asia
5. Valuations
mm2 is currently trading at 20.4 consensus FY17E P/E, at a 9% discount to
peers. This is despite its growth profile and superior ROE of 30%. mm2 is
also one of a handful of profitable publicly-listed film producers and
should see earnings scale up quickly if the company is able to break into
new markets.
The street has 1 Buy and 1 Hold call on the counter with a consensus TP of
SGD0.74.
Figure 15: Peer comparison table
Source: Company data, Bloomberg
6. Risks
Key risks that investors should take note of include:
1. Non-fulfilment of production budget
2. Production execution risks
3. FX risks
4. Risk of equity fund raising
6.1 Non-fulfilment of production budget
The production budget requires mm2 to source for investors, essentially,
content stakeholders. Despite its networks and business relationships,
mm2 currently does not have a fixed list of investors that it can rely on
readily for any single movie it hopes to produce. This gives rise to the risk
that budgets might not be fully fulfilled.
What happens next?
If mm2 is able to fulfil 90% of the production budget, it may take up a 10%
equity stake in the film. Anything more is a strict no-no. If it forsakes the
entire film, there is then an opportunity cost associated with the decision,
but if it takes on that limited equity stake, mm2 would then be exposed
to box office receipts of the specific movie, a risk that it is generally not
willing to take.
Company Ticker
Share
price
(LCY)
Consensus
TP (LCY)
Market Cap
(LCY)
ROE
(%)
P/E
Current
(x)
P/E
Forward
(x)
P/B
(x)
Operating
Margin (%)
mm2 AsiaMM2 SP 0.665 0.74 333.9 29.5 37.5 20.4 12.7 26.4
Alibaba Pictures Group1060 HK 1.76 N/A 44,413.8 4.2 80.9 N/A 2.3 -78.2
Media Asia Group8075 HK 0.50 N/A 1,068.0 N/A 356.7 N/A 1.3 -6.4
Toei Co 9605 JP 941 3,280.0 136,760.1 6.7 12.8 13.2 0.9 10.4
Toho Co 9602 JP 2,732 1,520.0 511,030.7 9.3 20.9 21.1 1.7 15.6
CJ E&M Corp 130960 KS 66,500 99,457.5 2,564,100.0 -1.5 N/A 33.1 1.6 2.8
Spackman Entertainment Group SEG SP 0.099 N/A 39.5 -7.6 N/A N/A 2.8 -26.7
Peers Average 2.2 117.8 22.5 2.2 -13.8
June 28, 2016 19
mm2 Asia
6.2 Production execution risks
As a producer, mm2 is very much like a project manager. Hence,
execution risks are prevalent throughout the filmmaking process. Risks
include production cost overruns and/or delays.
This however, can be mitigated by strict adherence to timelines as well as
cost discipline.
6.3 FX Risks
mm2 is exposed to five regional currencies versus its reporting currency,
the SGD. In FY16, FX losses jumped to SGD0.2m (FY15: SGD7,000).
This could grow if currencies depreciate against the SGD. There is some
natural hedging though as revenue and expenses are mostly recorded in
local currencies. However, profits are still translated back at the head
office and can thus lead to significant FX losses as it pivots to the North
Asia in particular.
6.4 Capital fundraising risks
Even with cash reserves of SGD4.7m and another SGD4.8m in unutilised
proceeds from its convertible notes issuance to Orientivity Capital
(Feb ’16), acquisitions so far could require an additional ~SGD17m. These
include:
1. UnUsUaL Group - SGD26m
A maximum of SGD16m (pending UnUsUaL’s fulfilment of profit
conditions) is currently unfunded. This is after taking into
consideration the use of SGD10m from the proceeds of the StarHub
placement to satisfy the first SGD10m tranche of payment for the 51%
stake.
2. Mega Cinemas (Malaysia) – RM22m (RM13m in cash; RM9m in new
shares)
3. Cathay Cineplexes – RM40m
Currently 49% (RM19.6m) of the total acquisition deal has not been
paid up and will be payable every six months over 18 months. Interest
will also be charged at a rate of 1.25% per annum.
Figure 16: Production overruns
Source: Maybank Kim Eng, Company data
June 28, 2016 20
mm2 Asia
4. Other acquisitions - TBC
As part of its growth strategy, management is currently on the
lookout for more acquisitions, particularly cinema assets. Such
acquisitions will be capex heavy and will require the group to seek
funding.
However, potential spinoffs like the recently announced planned spinoff
of UnUsUaL Group, as well as strategic investors from China could
partially plug this gap. Nonetheless, shareholders will have to bear some
form of burden either through dilution (private placements) or through
higher interest costs (debt).
June 28, 2016 21
mm2 Asia
Annex I: Key Personnel
Melvin Ang, Founder, Chief Executive Officer, and Executive Director
Melvin Ang is responsible for overseeing and managing mm2’s productions, as
well as sourcing new business opportunities for the company. Mr. Ang has 20
years of industry experience and was once named the top five individuals in
Singapore’s arts, entertainment and lifestyle sectors in the Straits Times Annual
Power List. Mr Ang accumulated his experience in the industry at various stints in
MediaCorp Singapore, SPH MediaWorks, and the then Television Corporation of
Singapore (TCS). Before setting up mm2 Malaysia and mm2 Singapore in January
2009, he served as Media Prima’s Executive Advisor between July 2007 and
December 2008. Melvin Ang graduated from Macquarie University with an MBA in
1996.
Chong How Kiat, Group Chief Finance Officer
Mr. Chong has close to 20 years of financial experience in property management
and development, construction, and media industries. Mr. Chong started out his
career as an Audit Assistant in 1995 at K.S. Lam & Co, Public Accountant.
Subsequently, he left and joined Mascon Sdn Bhd as an Assistant Accountant,
before joining Mines Shopping Fair Sdn Bhd as an Accountant. Thereafter in 2004,
he was promoted to Financial Controller of East Vision Leisure Group, holding
company of Mines Shopping Fair Sdn Bhd. Subsequently, Mr Chong joined Oriental
Eminence Sdn Bhd in 2008 as Finance Manager, before leaving in 2010, where he
joined Kencana Pinwell Sdn Bhd as the same position. Prior to joining mm2 Asia
Ltd. in 2014 as Group Financial Controller, Mr Chong held the position of Finance
Manager at ITD Vertex Consortium Sdn Bhd and subsequently Sapphire Plenitude
Sdn Bhd.
Ng Say Yong, Chief Content Officer
Mr. Ng is overall in charge of the creative content development of the group’s
productions. He is a media industry veteran who has produced and directed some
of the most successful TV dramas in Singapore such as ‘Growing Up ’, ‘Triple
Nine’ and ‘Shiver’. He joined the Singapore Broadcasting Corporation, which
subsequently became the Television Corporation of Singapore in 1994, as a
producer and director of current affairs and entertainment programmes. In 1996,
he left the Television Corporation of Singapore to teach media production at
Ngee Ann Polytechnic. Two years later, he joined MediaCorp Studios as an
Assistant Vice-President and was subsequently promoted to Senior Vice
President. After leaving MediaCorp Studios in 2007, Mr. Ng stayed in Australia for
three years before joining mm2 Singapore in 2010 as a Creative Director. Say
Yong graduated from the National University of Singapore, in 1988, with a
Bachelor of Arts (Honours).
Toong Soo Wei, General Manager, mm2 Singapore
Mr. Toong is responsible for the overall operations of mm2 Singapore. He began
his career as an Assistant Producer in the Chinese language drama department of
MediaCorp Studios in 2000. In November 2003, he joined Image Marcom &
Productions Pte Ltd as a writer and producer. For 2 months in 2004, he worked as
a freelance assistant director to assist Jack Neo in the production of ‘Best Bet’.
Between 2004 and 2008, he worked at J Team Productions Pte Ltd as an Assistant
Creative Manager and as General Manager and Head of Production. He
subsequently left to join Homerun Asia Pte Ltd in 2011 until he left, in October
2012, to work as General Manager for mm2 Singapore. Mr. Toong obtained an
Advanced Diploma in Mass Communications awarded by the Management
Development Institute of Singapore in 2008.
June 28, 2016 22
mm2 Asia
Angelin Ong, General Manager, mm2 Malaysia
Ms. Ong is responsible for the overall operations of mm2 Malaysia. From 2001 to
2003, she worked at Publicis CGS Sdn Bhd, an advertising agency, as an account
executive and was responsible for brand visibility planning and product
packaging. In 2003, she joined Think Reka Sdn Bhd, an industrial design agency,
as a client service manager. As a client service manager, she was involved in
business development and product strategy formulation. In 2004, Ms. Ong left
that company and joined Stormfbi Sdn Bhd, an advertising agency, as an account
manager in charge of client servicing and providing brand consultancy services. In
2005, she was appointed as manager of Sistem Televisyen Malaysia Berhad
(“STMB”), a free-to-air television station in Malaysia. As manager of STMB’s
creative group, she was required to customise station content for advertisers. In
2007, Ms. Ong joined AltMedia Sdn Bhd, a subsidiary of Media Prima, to initiate
new business ideas and revenue before joining mm2 Malaysia in 2009. Ms. Ong’s
experience in both traditional and new media is invaluable in a rapidly evolving
media industry. Ms. Ong graduated from the Curtin University of Technology, in
2000, with a Bachelor of Commerce majoring in advertising and marketing.
Kent Chan, Senior Manager, Business and Content Development, mm2
Malaysia
Mr. Chan is responsible for content development and managing mm2 Malaysia’s
projects. From 2006 to 2007, Mr. Chan was employed by eGenting Sdn Bhd as a
Technical Support Executive. In 2008, he was appointed as a Production
Executive of Media Prima. Before joining mm2 Malaysia in 2009, he was employed
by mmStudios, in June 2008, as a Business Executive where he was responsible
for, among others, managing projects, artistes and logistics. Mr. Chan graduated
from INTI College Malaysia TWN Coventry University, in 2005, with a Bachelor’s
Degree in Software Engineering.
Mok Pak Lam, Non-Executive Director, mm2 Asia
Mr. Mok was appointed non-executive director of the board (on 10 Jun) in
conjunction with mm2’s private placement to StarHub. Mr. Mok oversees the
Network Engineering, SmartHub (data analytics research) and i3 (Innovation,
Investment, Incubation) Divisions at StarHub. He is responsible for establishing
StarHub's technical vision and leading all aspects of technology development. He
also looks into the strategy for technology platforms and external partnerships,
as well as initiatives for innovations.
June 28, 2016 23
mm2 Asia
0
100
200
300
400
500
600
700
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16
mm2 Asia - (LHS, SGD) mm2 Asia / Straits Times Index - (RHS, %)
Value Proposition
One of two SGX-listed producers of films and TV/online
content in Asia with revenue CAGR growth of 55% over the
past five years. FY16 revenue growth came from organic
(40%) and inorganic (60%) means.
Government support and grants in Hong Kong, Singapore,
Malaysia, and Taiwan enables it to fulfil production budget
as governments take an equity stake in the overall filming
process.
Recently expanded downstream to cinema operations
through acquisition of cinema assets thereby possibly
transitioning to a more asset heavy business model.
FY16 ROIC of 22.7% may be considered elevated as capital
is expected to increase in light of heavier capex. WACC at
8.1%.
Global Box Office (USD‘b)
Source: MPA International
Price Drivers
Historical share price trend
Source: Company, Maybank Kim Eng
1. Agreed to collaborate with Fox International Channels to
co-produce four films 2. Co-produced movie, Ah Boys to Men 3 became the top
opening weekend Asian movie in Singapore of all time, with gross takings of SGD6.23m
3. Announced acquisition of five cinemas in Malaysia for RM62m
4. Proposed acquisition of 51% stake in concert organiser, UnUsUaL Group for SGD26m
5. Private placement of 44m new shares to StarHub at SGD0.41/share to raise SGD18m for working capital and strategic acquisitions
Financial Metrics
Financial performance relies heavily on number of movies
it produces and distributes
Management disclosed that it has 20 and 19 films (FY16:
14 and 9 films) in its production and distribution pipeline
in FY17 alone
Will require significant capex if it intends to expand its
current network of five cinemas. On average, it spent
about SGD4m (10% of FY16 shareholders equity) per
cinema.
FY16 net profit spiked 61% to SGD8.2m on revenue of
SGD38.3m (+58%), boosted by newly acquired businesses in
3D animation & visual effects and cinema operations.
Revenue mix
Source: Company data
Swing Factors
Upside
New films with strong cast and/or brand names being
added into production pipeline
Making inroads into China content production through
partnership with Hesheng Media; and the receipt of
grants from the Chinese central government
Establishment of strong working relationships with
famous artistes such as A-mei, and Andy Lau through its
51% stake in concert organiser, UnUsUaL Group
Downside
Potential fund raising for acquisitions and expansion into
China
Drying up of production pipeline or unexpected
production delays or cost overruns of films
Revocation of government support and/or poor take-up
rate by content investors
10.8 10.7 10.9 10.6 9.7
9
10.4 11.1
12.4
14.1
2.6 2.8 3 3 3.4
0
2
4
6
8
10
12
14
16
2011 2012 2013 2014 2015
EMEA Asia Pacific Latin America
1
5
1 2
4
3
June 28, 2016 24
mm2 Asia
FYE 31 Mar FY12A FY13A FY14A FY15A FY16A
Key Metrics
P/E (reported) (x) nm nm 50.2 27.0 36.0
Core P/E (x) nm nm 50.2 27.0 36.0
P/BV (x) nm nm 37.7 7.2 8.1
P/NTA (x) nm nm nm nm nm
Net dividend yield (%) 0.0 0.0 0.0 0.0 0.0
FCF yield (%) 0.0 0.0 0.2 nm nm
EV/EBITDA (x) na na na 2.1 12.4
EV/EBIT (x) na na na 3.1 23.4
INCOME STATEMENT (SGD m)
Revenue 6.6 9.9 16.1 24.3 38.3
Gross profit 0.3 1.7 5.1 9.6 18.4
EBITDA 0.0 1.6 7.2 9.9 19.1
Depreciation (0.1) (0.6) (0.0) (0.0) (0.5)
Amortisation 0.0 0.0 (3.4) (3.2) (8.5)
EBIT (0.1) 1.0 3.8 6.6 10.1
Net interest income /(exp) 0.0 (0.0) (0.0) (0.0) (0.4)
Associates & JV 0.0 0.0 0.0 0.0 0.0
Exceptionals 0.0 0.0 0.0 (0.0) 0.2
Other pretax income 0.0 (0.0) (0.0) 0.0 0.0
Pretax profit (0.0) 0.9 3.7 6.6 10.0
Income tax 0.0 (0.2) (0.7) (1.5) (1.1)
Minorities 0.1 0.0 (0.3) 0.0 (0.7)
Perpetual securities 0.0 0.0 0.0 0.0 0.0
Discontinued operations 0.0 0.0 0.0 0.0 0.0
Reported net profit 0.1 0.8 2.7 5.1 8.2
Core net profit 0.1 0.8 2.7 5.1 8.2
BALANCE SHEET (SGD m)
Cash & Short Term Investments 0.1 0.4 0.5 5.8 4.7
Accounts receivable 1.5 7.2 8.6 20.6 24.4
Inventory 0.3 0.3 1.5 0.0 0.3
Property, Plant & Equip (net) 0.2 0.1 0.1 0.1 3.6
Intangible assets 0.1 1.1 3.9 6.3 25.3
Investment in Associates & JVs 0.0 0.0 0.0 0.0 0.0
Other assets 1.0 1.3 2.8 4.8 10.6
Total assets 3.2 10.4 17.5 37.6 69.0
ST interest bearing debt 0.1 0.2 0.1 0.2 0.2
Accounts payable 2.2 8.3 10.9 14.7 23.8
LT interest bearing debt 0.1 0.3 1.0 0.1 2.8
Other liabilities 1.0 1.0 2.0 3.0 5.0
Total Liabilities 3.3 9.7 13.7 18.4 31.8
Shareholders Equity 0.1 0.9 3.6 19.2 36.2
Minority Interest (0.1) (0.2) 0.1 0.0 1.0
Total shareholder equity (0.1) 0.7 3.8 19.2 37.2
Perpetual securities 0.0 0.0 0.0 0.0 0.0
Total liabilities and equity 3.2 10.4 17.5 37.6 69.0
CASH FLOW (SGD m)
Pretax profit (0.0) 0.9 3.7 6.6 10.0
Depreciation & amortisation 0.1 0.6 3.4 3.3 9.0
Adj net interest (income)/exp 0.0 0.0 0.0 0.0 0.4
Change in working capital 0.1 (1.3) (6.9) (12.0) (22.6)
Cash taxes paid (0.0) 0.0 0.0 (0.1) (0.1)
Other operating cash flow 0.0 0.0 0.1 0.3 0.0
Cash flow from operations 0.1 0.4 0.3 (1.9) (3.3)
Capex 0.0 0.0 0.0 0.0 0.0
Free cash flow 0.1 0.4 0.3 (1.9) (3.3)
Dividends paid 0.0 0.0 0.0 0.0 0.0
Equity raised / (purchased) 0.0 0.0 0.0 6.1 9.1
Perpetual securities 0.0 0.0 0.0 0.0 0.0
Change in Debt 0.0 0.2 0.5 2.9 2.3
Perpetual securities distribution 0.0 0.0 0.0 0.0 0.0
Other invest/financing cash flow (0.1) (0.3) (0.5) (2.0) (9.2)
Effect of exch rate changes 0.0 0.0 0.0 0.0 0.0
Net cash flow 0.0 0.3 0.2 5.2 (1.1)
June 28, 2016 25
mm2 Asia
FYE 31 Mar FY12A FY13A FY14A FY15A FY16A
Key Ratios
Growth ratios (%)
Revenue growth nm 50.7 62.7 50.7 57.9
EBITDA growth nm 3,604.5 342.9 36.9 93.0
EBIT growth nm nm 277.6 74.7 53.2
Pretax growth nm nm 290.6 77.7 51.8
Reported net profit growth nm 776.3 236.3 85.5 60.8
Core net profit growth nm 776.3 236.3 85.5 60.8
Profitability ratios (%)
EBITDA margin 0.7 16.5 44.8 40.7 49.8
EBIT margin nm 10.1 23.4 27.1 26.3
Pretax profit margin nm 9.6 23.0 27.1 26.1
Payout ratio nm nm 0.0 0.0 0.0
DuPont analysis
Net profit margin (%) 1.4 8.2 17.0 20.9 21.3
Revenue/Assets (x) 2.1 0.9 0.9 0.6 0.6
Assets/Equity (x) 39.1 11.6 4.8 2.0 1.9
ROAE (%) 226.8 165.8 120.6 44.5 29.5
ROAA (%) 5.8 12.0 19.7 18.5 15.3
Liquidity & Efficiency
Cash conversion cycle (14.0) (57.8) (106.4) (78.3) (133.8)
Days receivable outstanding 41.5 157.8 176.2 216.4 211.3
Days inventory outstanding 7.8 13.3 29.9 18.3 2.4
Days payables outstanding 63.3 228.9 312.5 313.0 347.4
Dividend cover (x) nm nm nm nm nm
Current ratio (x) 0.9 1.0 1.1 1.9 1.4
Leverage & Expense Analysis
Asset/Liability (x) 1.0 1.1 1.3 2.0 2.2
Net debt/equity (%) 141.5 5.7 16.6 net cash net cash
Net interest cover (x) nm 23.8 83.8 nm 26.8
Debt/EBITDA (x) 5.9 0.3 0.2 0.0 0.2
Capex/revenue (%) 0.0 0.0 0.0 0.0 0.0
Net debt/ (net cash) 0.1 0.1 0.6 (5.4) (1.7)
Source: Company; Maybank
June 28, 2016 26
mm2 Asia
Research Offices
REGIONAL
Sadiq CURRIMBHOY
Regional Head, Research & Economics
(65) 6231 5836 [email protected]
WONG Chew Hann, CA
Regional Head of Institutional Research
(603) 2297 8686 [email protected]
ONG Seng Yeow
Regional Head of Retail Research
(65) 6231 5839 [email protected]
TAN Sin Mui
Director of Research
(65) 6231 5849 [email protected]
ECONOMICS
Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]
Luz LORENZO Philippines
(63) 2 849 8836 [email protected]
Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected]
JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682
STRATEGY
Sadiq CURRIMBHOY
Global Strategist
(65) 6231 5836 [email protected]
Willie CHAN
Hong Kong / Regional
(852) 2268 0631 [email protected]
MALAYSIA
WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy
Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance
LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional
ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional
Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem
YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media
TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos
WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property
LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove • Ports • Shipping
CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure
Ivan YAP (603) 2297 8612 [email protected] • Automotive • Semiconductor • Technology
Kevin WONG (603) 2082 6824 [email protected] • REITs • Consumer Discretionary
LIEW Wei Han
(603) 2297 8676 [email protected] • Consumer Staples
LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]
Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]
Cheah Chong Ling (603) 2297 8767 [email protected]
HONG KONG / CHINA
Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional
Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto
Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables
Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto
Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos
Ning MA (852) 2268 0672 [email protected] • Insurance
Sonija LI, CFA, FRM (852) 2268 0641 [email protected] • Gaming
Stefan CHANG, CFA (852) 2268 0675 [email protected] • Technology – Regional
Warren LAU (852) 2268 0644 [email protected] • Technology – Regional
INDIA
Jigar SHAH Head of Research
(91) 22 6623 2632 [email protected]
• Oil & Gas • Automobile • Cement
Anubhav GUPTA
(91) 22 6623 2605 [email protected]
• Metal & Mining • Capital Goods • Property
Vishal MODI
(91) 22 6623 2607 [email protected]
• Banking & Financials
Abhijeet KUNDU
(91) 22 6623 2628 [email protected]
• Consumer
Neerav DALAL
(91) 22 6623 2606 [email protected]
• Software Technology • Telcos
SINGAPORE
Gregory YAP (65) 6231 5848 [email protected] • SMID Caps • Technology & Manufacturing • Telcos
YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine
Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)
Joshua TAN (65) 6231 5850 [email protected] • REITs (Retail, Industrial)
John CHEONG, CFA (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare
Ng Li Hiang (65) 6231 5840 [email protected] • Banks
INDONESIA
Isnaputra ISKANDAR Head of Research (62) 21 8066 8680 [email protected] • Strategy • Metals & Mining • Cement
Rahmi MARINA (62) 21 8066 8689 [email protected] • Banking & Finance
Aurellia SETIABUDI (62) 21 8066 8691 [email protected] • Property
Pandu ANUGRAH (62) 21 8066 8688 [email protected] • Infra • Construction • Transport• Telcos
Janni ASMAN (62) 21 8066 8687 [email protected] • Cigarette • Healthcare • Retail
Adhi TASMIN (62) 21 8066 8694 [email protected] • Plantations
Anthony LUKMAWIJAYA (62) 21 8066 8690 [email protected] • Aviation
PHILIPPINES
Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos
Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement
Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics
Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction
Michael BENGSON (63) 2 849 8840 [email protected] • Conglomerates
Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer
THAILAND
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer • Materials • Ind. Estates
Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport
Yupapan POLPORNPRASERT (66) 2658 6300 ext 1394 [email protected] • Oil & Gas
Tanawat RUENBANTERNG (66) 2658 6300 ext 1395 [email protected] • Banks & Diversified Financials
Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]
Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy
Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy
Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel
Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce
Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem
Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property
Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap
VIETNAM
LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities
THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials
Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas
NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking
TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction
PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery
NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage
TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas
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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through Maybank Kim Eng Securities USA Inc. This report is not directed at you if it is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
June 28, 2016 28
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Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of 28 June 2016, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 28 June 2016, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Ong Seng Yeow | Executive Director, Maybank Kim Eng Research
Definition of Ratings
Maybank Kim Eng Research uses the following rating system
BUY Return is expected to be above 10% in the next 12 months (excluding dividends)
HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)
SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
DISCLOSURES
Legal Entities Disclosures
Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
June 28, 2016 29
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Malaysia Maybank Investment Bank Berhad
(A Participating Organisation of
Bursa Malaysia Securities Berhad)
33rd Floor, Menara Maybank,
100 Jalan Tun Perak,
50050 Kuala Lumpur
Tel: (603) 2059 1888;
Fax: (603) 2078 4194
Singapore Maybank Kim Eng Securities Pte Ltd
Maybank Kim Eng Research Pte Ltd
50 North Canal Road
Singapore 059304
Tel: (65) 6336 9090
London Maybank Kim Eng Securities
(London) Ltd
PNB House
77 Queen Victoria Street
London EC4V 4AY, UK
Tel: (44) 20 7332 0221
Fax: (44) 20 7332 0302
New York Maybank Kim Eng Securities USA
Inc
777 Third Avenue, 21st Floor
New York, NY 10017, U.S.A.
Tel: (212) 688 8886
Fax: (212) 688 3500
Stockbroking Business:
Level 8, Tower C, Dataran Maybank,
No.1, Jalan Maarof
59000 Kuala Lumpur
Tel: (603) 2297 8888
Fax: (603) 2282 5136
Hong Kong Kim Eng Securities (HK) Ltd
Level 30,
Three Pacific Place,
1 Queen’s Road East,
Hong Kong
Tel: (852) 2268 0800
Fax: (852) 2877 0104
Indonesia PT Maybank Kim Eng Securities
Sentral Senayan III, 22nd Floor
Jl. Asia Afrika No. 8
Gelora Bung Karno, Senayan
Jakarta 10270, Indonesia
Tel: (62) 21 2557 1188
Fax: (62) 21 2557 1189
India Kim Eng Securities India Pvt Ltd
2nd Floor, The International,
16, Maharishi Karve Road,
Churchgate Station,
Mumbai City - 400 020, India
Tel: (91) 22 6623 2600
Fax: (91) 22 6623 2604
Philippines Maybank ATR Kim Eng Securities Inc.
17/F, Tower One & Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City, Philippines 1200
Tel: (63) 2 849 8888
Fax: (63) 2 848 5738
Thailand Maybank Kim Eng Securities
(Thailand) Public Company Limited
999/9 The Offices at Central World,
20th - 21st Floor,
Rama 1 Road Pathumwan,
Bangkok 10330, Thailand
Tel: (66) 2 658 6817 (sales)
Tel: (66) 2 658 6801 (research)
Vietnam Maybank Kim Eng Securities Limited
4A-15+16 Floor Vincom Center Dong
Khoi, 72 Le Thanh Ton St. District 1
Ho Chi Minh City, Vietnam
Tel : (84) 844 555 888
Fax : (84) 8 38 271 030
Saudi Arabia In association with
Anfaal Capital
Villa 47, Tujjar Jeddah
Prince Mohammed bin Abdulaziz
Street P.O. Box 126575
Jeddah 21352
Tel: (966) 2 6068686
Fax: (966) 26068787
South Asia Sales Trading Kevin Foy
Regional Head Sales Trading
Tel: (65) 6336-5157
US Toll Free: 1-866-406-7447
North Asia Sales Trading Andrew Lee
Tel: (852) 2268 0283
US Toll Free: 1 877 837 7635
Malaysia Rommel Jacob [email protected] Tel: (603) 2717 5152
Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820
Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177
New York Andrew Dacey [email protected] Tel: (212) 688 2956
India Manish Modi [email protected] Tel: (91)-22-6623-2601
Vietnam Tien Nguyen [email protected]
Tel: (84) 44 555 888 x8079
Philippines Keith Roy [email protected] Tel: (63) 2 848-5288
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