mm2Asia

mm2Asia: CIMB initiates with an Add rating and TP of $0.70, implying a 30% upside from current prices.

Mm2 is a film/TV producer, offering a spectrum of movie-making services, and is poised to ride on the rise of the film business in China. It first expanded into China in 2013, via co-productions with local partners. One of a reason why China is an attractive market is due to its bigger budget and wider audience reach, notwithstanding increasing consumer demand.

Its growing production pipeline will be its key revenue driver, while Malaysia cinemas will contribute to FY16 earnings.

Unlike most production and media companies, mm2 typically does not take equity stake in movie production. Mm2 derives income from film budgets in the form of producer fees. Biz model is high margin (~40% gross, ~20% net) with little movie financing, reducing risk of exposure commercial success/failure outcomes.
Mm2 is currently trading at 32x FY16 consensus P/E. CIMB’s 70¢ TP implies 22x CY17 P/E.