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Brokers' take

This article is more than 12 months old

Compiled by Leila Lai

MM2 ASIA | BUY

AUG 15 CLOSE: $0.42

TARGET PRICE: $0.62

DBS Group Research, Aug 15

We continue to expect strong earnings compound annual growth rate of 25 per cent for FY2018-20F, underpinned by growth in production, expansion into the China market, and contribution from UnUsUaL.

The stronger cinema arm, with the completion of the Cathay brand acquisition, helps the group build a recurring income base.

Having a strong presence in the entire value chain of content creation and distribution further cements mm2's status as the leader in the media/entertainment industry.

Growth in revenue from all segments: Q1 FY2019 revenue doubled to $49 million while net profit gained 13.2 per cent year-on-year to $7.2 million.

We value the production business at 18 times price/earnings ratio, in line with peers listed in Asia, versus consensus' valuation of about 22 times.

For UnUsUaL, we value it at current valuation. For the cinema segment, we use 21 times price/earnings ratio versus consensus' 20 times.

Reiterate "buy". Our sum-of-parts target price is now 62 cents, pegged to 18 times FY2019F earnings for core business, cinema and post production segment, and current valuation for UnUsUaL, reduced from 21 times previously, in line with peers.

FOOD EMPIRE | NEUTRAL

AUG 15 CLOSE: $0.555

TARGET PRICE: $0.60

RHB Research, Aug 15

Downgrade to "neutral" from "buy" with lower target price of 60 cents from $1.07, implying 7 per cent upside. We believe the group is heading in the right direction over the long run by diversifying into Asia.

However, with the US imposing more sanctions on Russia, we expect more downside risks from the depreciation of the rouble and its regional currencies.

As such, we see limited reasons to be vested in Food Empire over the near term given that 60 per cent of its revenue is generated from Russia and other Commonwealth of Independent States countries.

Food Empire recorded a forex loss of US$2 million (S$2.8 million) in Q2 FY2018 as the rouble and euro weakened against the US dollar.

We noted the group derives 40 per cent of its revenue from Russia and has loans (for the purchase of equipment at its new plant) denominated in euros.

The forex loss represented 55 per cent of pretax profit, dragging it down 20 per cent compared to Q2 FY2017.

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision.

The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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