Brokers' take

mm2 Asia | Buy Target price: S$0.63 April 13 close: S$0.505 DBS Group Research, April 13

The listing status of 41.9 per cent-owned Unusual would help to propel mm2 Asia's growth going forward. Unusual can now tap the equity market for expansion. We project mm2 to grow at an EPS CAGR of 52 per cent for FY16-FY19, underpinned by growth in productions, expansion into the China market, and contribution from Unusual. The cinema arm, on the other hand, helps the group to build a recurring income base. Upon completion of the latest acquisition of 13 cinemas in Malaysia, mm2 Asia would become a top four player in Malaysia.

We value the core business, Unusual and post production segments based on 28x PE, in line with peers listed in Asia, vs consensus of about 25x. For the cinema segment, we use a 21x valuation peg. We expect North Asia to contribute more than 70 per cent of core revenue from FY17F, up from 23 per cent for FY16. Upside to earnings could come from more projects, especially in China where the market is bigger and budgets are much higher.