Hot stock: mm2 Asia up 9.8% after deal to sell cinema business falls through

SHARES of mm2 Asia were actively traded in the morning trading session on Monday (Jan 3), after the entertainment company announced that its deal to sell its cinema business fell through.

Shares of mm2 Asia hit S$0.056 as at 11.17am, up 9.8 per cent or S$0.005, with 2.1 million shares changing hands.

No married deals were recorded, according to ShareInvestor data.

The counter was still trading at its high of S$0.056 as at the midday break on Monday.

mm2 Asia - which operates cinemas under the Cathay brand - previously announced that it had inked a deal with local investment firm Kingsmead Properties to sell its cinema business for S$84.8 million. The proposed sale was to be completed by Dec 31.

In a bourse filing on Monday, mm2 said Kingsmead has instead chosen to exercise its exchange right, and will exchange its deposit of S$6 million into 75 million newly issued mm2 shares at a share price of S$0.08 per share.

The unsuccessful deal with Kingsmead comes a month after mm2 said it was pausing the spin-off and initial public offering (IPO) of its cinema business.

In 2020, mm2 said it was planning to spin off its cinema business and list it on the Catalist board of the Singapore Exchange (SGX).

However, in December last year, the company said it was pausing the move as it likely does not comply with chain listing requirements. It noted that SGX will normally not approve the listing of a subsidiary of a listed issuer if the assets and operations of that subsidiary are substantially the same as that of the listed issuer.

Besides the spin-off and proposed sale, mm2 was also looking at a third option of merging its cinema business with Golden Village cinemas, which are owned by Hong Kong entertainment company Orange Sky Golden Harvest Entertainment (Holdings).

Announced in December 2020, the company was seeking a merger that would make the enlarged business the biggest cinema operator in Singapore.

mm2 had said it was pursuing the 3 transactions independently of one another, in its response to queries from SGX in August 2021.

For its first half ended Sep 30, 2021, the entertainment company posted a net loss of S$13.8 million, narrowing from a net loss of S$25.8 million in the same period a year ago.

Meanwhile, its half-year revenue jumped 132.5 per cent to S$46.3 million, from S$19.9 million in the year-ago period, which it attributed to the easing of the government's Covid-19 restrictions.

mm2 noted that revenue from its core business rose due to more production projects completed in the period, and the gradual reopening of cinemas as consumer confidence returned had contributed to a higher distribution income.

READ MORE: Show will go on for Covid-hit cinema business, says mm2 Asia CEO