Jovi Ho Thu, Jun 02, 2022
Film and concert producer mm2 Asia needs “concrete plans” to reduce gearing, as proposed initiatives to reduce debt have lapsed, says DBS Group Research analyst Ling Lee Keng.
“mm2 Asia had proposed several initiatives in the past to pare down its debt, but these have since lapsed. Previous proposals include spin-off and listing of cinemas, sale of cinemas, and merger of the cinema business with Golden Village cinemas in Singapore. The group continues to explore new avenues to pare down its debt,” writes Ling.
In a June 1 note, Ling is maintaining “hold” on mm2 Asia with a lower target price of 6 cents from 6.7 cents previously. The research house is also suspending coverage of mm2 Asia due to a “reallocation of resources”.
More concrete debt-paring plans need to be in place to ensure a turnaround, writes Ling. “With the reopening of the global economies, we can expect a strong recovery for the group’s projects, including content production and concerts. A key bright spot is the resumption of concert production, where its 39%-owned subsidiary UnUsUaL will be a key beneficiary.”
UnUsUaL was the first to present a large-scale, indoor live concert since the reopening, one by Taiwanese singer A-Lin, at the Singapore Indoor Stadium on May 28.
FY2022 net loss misses expectations
mm2 Asia’s FY2022 net loss decreased to $35.8 million, an improvement from the $90.8 million loss in FY2021. That said, the figure is still below expectations, says Ling.
Revenue saw a 50% y-o-y increase to $113 million, driven by the further relaxing of Covid-19 restrictions in Singapore and Malaysia.
“Overall, FY2022 results were below expectations, as we were expecting the net loss to reduce further, to $17.4 million,” writes Ling.
Ling expects “strong recovery within 12 to 18 months” for mm2 Asia. “With the lifting of most restrictions from April 2022, business conditions are expected to improve going forward. For the cinema segment, with the release of more titles and consumers returning to the new normal, business has gradually picked up.”
Additionally, concert businesses in Singapore and Malaysia have been able to operate at full capacity since April 2022. Says Ling: “The group is seeing strong demand for regional content, global cinema box office recovery, as well as expected pent-up demand for concerts and events as restrictions ease.”
Recent fundraising
After a tough ride in the last two years, the group is beginning to see positive traction for its businesses as more markets emerge from the pandemic, says Ling.
To ride on this recovery path, mm2 conducted two fundraising exercises in the last two months, raising $25.5 million via the placement of new shares. The group placed 75 million new shares at $0.08 in March 2022, and another tranche of 390 million new shares at $0.05 to Singaporean businessmen Sam Goi and Oei Hong Leong in April 2022. In April 2021, the group raised $54.6 million via a rights issue of shares.
Writes Ling: “We project the group to register net loss of $13.4 million in FY2023F, compared to our earlier expectation of $7.8 million, on the back of the 30% cut in revenue projection, partly offset by higher gross margin assumptions of 24.5%, vs. 17.8% previously.”
As at 11.29am, shares in mm2 Asia are trading 0.1 cent higher, or 1.85% up, at 5.5 cents.