Sunday, July 9, 2017

MM2

MM2 has dropped around 15% from the peak $0.65 to $0.55 per share. Although I am not invested in MM2, it has been on my shopping list.

MM2 is Singapore based film production and distribution company which has produce popular titles like Ah boy to men and long long time ago. Now, the forth movie Ah boy to men is undergoing filming. Furthermore, it has also goes into cinema acquisition of golden village. This will help in further growth of the company.

To do this calculation, I use the data from SGX. The return on Asset and return on Equity meets my target. From EBITDA (Earning before interest, Tax, Depreciation and Amortization of a company) /Interest expenses also looks healthy. High ratio is sign of strong cash flows to cover its debt expenses while low ratio will indicate potential cash flow issue.


By using the normalized diluted EPS, I did some calculation for projected EPS for the future.
Using the margin of safety 20% and constant growth of 0.106, MM2 projected future share price in 5 years would $6.49 and target discounted price would be $2.61.

However, if the growth slow down by 50% while margin of safety remain at 20%, Jumbo projected future share price in 5 years would $1.26 and target discounted price would be $0.93 compared to the current price of $0.55

Using Swot analysis 

Strength
-Diversify earning
It is one of the leading content producer in Asia in 5 different countries (China, Taiwan, Hong Kong, Malaysia & Singapore). The group earning is quite diversify f rom all relevant stages of filming making process, distribution income, advertisement income and cinema income
-Strong management

Weakness
-Change in consumer demand
As the world is changing fast, the consumer demand also changes especially with the online streaming.
-Lack of good production
Availability of movie script is essential for good movie production. 
-Rise of interest rate
MM2 will require fund especially for Cinema expansion. Rise of interest rate will affect the borrowing cost and hence it will affect the profitability. 

Opportunities 
-Further cinema expansion
MM2 is quite aggressive in this cinema expansion which is good for further growth. 
-Possibility of going into Online movie streaming
With fast internet speed, some people prefer to stream movie online. This is opportunity which MM2 can look into.
-Oversea expansion into other markets outside Asia.

Threats
-Change in oversea regulation
Due to expansion oversea, any change in oversea regulation might also affected the company.
-Currency exchange
As they are expanding oversea, there might be some Forex exchange losses.
-Unable to secure distribution right
Managing competition from other entertainment companies

I am not holding any MM2 shares when I am writing this analysis but the current price of MM2 is pretty attractive. Furthermore, MM2 has a club which is a programme targeted exclusively at shareholders of Unusual Limited and MM2 Asia Ltd to offer a variety of benefits to eligible shareholders. Hence, I am planning to get some MM2 shares. Do note that is not a call to buy or sell, please do your own due diligent.