Compiled by Kenneth Lim, The Business Times
CITYNEON HOLDINGS | BUY
TARGET PRICE: S$1.26
FEB 24 CLOSE: S$0.835
DBS Group Research, Feb 24
We continue to expect Cityneon to register explosive FY16-FY19 forecast earnings per share at a compounded annual growth rate of about 150 per cent.
Cityneon is attractive to investors seeking growth and unique ideas in the entertainment industry.
An expanding project pipeline, plans to add a third Intellectual property (IP), and potential tie-ups with strategic investors are catalysts.
Cityneon reported a strong surge in earnings for FY2016, mainly contributed by the IP Rights (IPR) segment, which generate revenue from both the travelling and permanent exhibition sets.
Cityneon's earnings are directly correlated with the number of exhibits it has, with the cost of subsequent sets at a fraction of the first set.
Furthermore, execution risk is low as it is usually borne by its partners for the travelling sets.
A huge pool of movie franchises (and their sequels) meet the management's criteria of box-office takings of more than US$1 billion.
Some attractive options include Star Wars, Jurassic Park, Batman and Spiderman.
Maintain "buy", with target price at S$1.26.
BREADTALK GROUP | BUY
TARGET PRICE: S$1.50
FEB 24 CLOSE: S$1.32
RHB Research, Feb 24
We upgrade our target price to S$1.50 pegged to six times core enterprise value-to-earnings before interest, tax, depreciation and amortisation. We use core Ebitda to better reflect the strong operating cash flow generated from the food & beverage businesses.
Its bakery segment's FY16 margins beat our expectations.
In its FY17 forecast, the management will focus on reconfiguring its bakery franchisees to optimise profitability.
This would involve replacing weaker franchisees with stronger operators.
With that, we expect to see better contributions from its bakery franchisees in the medium term.
Improvement in bakery margins is, however, offset by weaker margins in the restaurant segment.
This was mainly due to higher staff costs. The management cited that gross margin was higher in FY15 due to higher-valued products introduced during the SG50 celebrations.
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