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

MM2 Asia chief executive Chang Long Jong is optimistic about the silver screen industry's recovery prospects, even as the group plans to dispose of its cinema business.

Responding to queries from The Business Times (BT) last month, Mr Chang said mm2's cinema business is in a stronger position from having been through various business recovery cycles since the onset of Covid-19.

Cinema operators in Singapore have had to bear multiple rounds of tightened, loosened then re-tightened regulations.

According to Cathay Cineplexes' website advisory on updated safety measures as of Sept 27, consumption of food and beverage is currently permitted in the cinemas' vaccinated-only halls. Alternate seats are sold in singles and in pairs to maintain a one-metre distance between patrons, and couple seats in certain halls have been temporarily removed to ensure safe distancing.

"It is still the case that the cinemas are required to operate at less than 50 per cent capacity while carrying the burden of full rental costs... Each phase (of government restrictions) has had its challenges and we feel that our cinemas have risen well to meet these challenges," Mr Chang said.

He added that mm2 Asia has been exploring various options over the past year to help optimise its cinema business over the long term and beyond Covid.

"The road to full recovery is expected to take more twists and turns, and we are taking all necessary precautions to ensure that the show will go on."

Mr Chang is, however, optimistic about the outlook for the cinema business. He said there is now greater clarity from Hollywood studios on their big screen movie release plans this year, compared to the previous year at the height of the pandemic: "Because of Covid, many major Hollywood titles (due for release in 2020) were postponed to this year, and we now have an exciting pipeline of blockbuster titles to be released in the coming months."

Anticipated releases for the remainder of 2021 include Marvel Comics-based films such as Venom: Let There Be Carnage and Eternals, which are slated to drop in Singapore in October and November, respectively.

Currently held by mm2 Asia, mm Connect operates eight Cathay-branded cinemas in Singapore and another 13 cinemas in Malaysia.

The group announced its intention to sell at least 80 per cent of the business to Kingsmead Properties in July this year. It inked a sale and purchase agreement with the local investment firm for a S$84.8 million consideration on Aug 30.

The deal will require shareholders' approval at an extraordinary general meeting (EGM) as well as approval from regulators.

"The cinema business is going through a lot of changes, including digital innovations. We are thankful that mm2's primary business as a regional content company is still very promising, with Hong Kong, Taiwan and China operating at near pre-Covid levels. In addition, the emergence of more streaming platforms has created more demand for content," Mr Chang told BT.

In spite of the difficulties, there seems to be a market for cinema-related assets. Not long after news of mm2 Asia's proposed divestment emerged, Spackman Entertainment Group in September announced it was selling its entire Zip Cinema business to Kakao Entertainment for S$19.8 million or about 18 billion won in cash.

The Spackman deal has prompted queries from the Singapore Exchange regarding, among others, the consideration and rationale for Spackman's proposed sale.

The group will be holding an EGM on Oct 19 to obtain shareholder approval for the transaction.

In March, Malaysia's Golden Screen Cinemas (GSC) announced it was buying some cinema assets from MCAT Box Office and Reel Entertainment Holdings. GSC is a unit of Bursa Malaysia-listed PPB Group.

US-listed cinema operator AMC Entertainment, meanwhile, has added several theatres to its footprint this year.

Drew & Napier's head of telecommunications, media and technology Lim Chong Kin sees both mm2 Asia and Spackman's proposed divestments as a situation of cinema operators looking for strategic investors, consolidations or even bailouts.

Noting "tremendous uncertainty" in the overall cinema industry, Mr Lim - who is also the law firm's managing director of corporate and finance - believes cinema operators remain highly anxious given the rising trend of major films debuting on platforms in recent years.

"On the horizon is also the US and China decoupling, where Hollywood may lose access to the enormous China cinema market and, vice versa, movies involving China production content may find a lesser following in the cinemas of Western countries. None of these factors bode well for the cinema operators at this point in time," Mr Lim told BT.

READ MORE:

• mm2 Asia to pursue Kingsmead transaction and cinema IPO options in parallel
• Private equity investor indicates interest in investing in mm2 Asia core business
• mm2 Asia proposes to merge its Cathay cinema business with Golden Village cinemas