STAR (6084) - Star Publications - A Marvel-ous deal by Cityneon
Target RM2.70 (Stock Rating: ADD)
We are positively surprised by Cityneon's (Star’s subsidiary) announcement to acquire Victory Hill Exhibitions (VHE) for a proposed consideration of S$21m (RM57m) that will be funded by cash and shares. Following the deal, Cityneon will own the rights to provide exhibition services to Marvel characters. We view the deal as earnings accretive as it helps to enhance the group’s strength in the event and exhibition segment and mitigate the print segment's persistent decline. We raise our FY15-17 EPS forecasts by 3-6% to account for stronger contribution from Cityneon. We upgrade Star to an Add, with a higher target price of RM2.70, still based on 11.3x CY16 P/E, a 25% discount to the target market P/E of 15x. We see stronger contribution from non-print segment and higher dividend payout as potential re-rating catalysts.
What Happened
Cityneon, a subsidiary of the Star Media Group, announced today it had entered into an agreement with Philadelphia Investment Ltd to buy Victory Hill Exhibitions Pte Ltd (VHE) for a total consideration of S$21m (RM57m) that will be satisfied via cash and shares. VHE holds the rights to provide exhibition services to Marvel until May 2017, including the rights to produce and operate the travelling exhibition called “Marvel’s The Avengers S.T.A.T.I.O.N (Scientific Training and Tactical Intelligence Operative Network)”. In addition, VHE also holds the rights to manufacture, distribute and sell Marvel merchandise at such exhibitions. The deal is expected to be completed by the end of 2Q15.
What We Think
We are positively surprised by the news and excited about Cityneon’s potential in leveraging the Marvel exhibition, as its plans to bring the production to major science museums across the world as well as potential partners in cities across Asia and the US. According to an independent valuer, VHE's indicative fair value is estimated at S$21.1m-25.2m. Meanwhile, Cityneon expects the Marvel exhibition to contribute about S$2.8m-4.5m in the first two years, which is higher than its S$2.3m net profit in FY14. Cityneon is planning to carry out a rights issue to partially finance the deal and Star will need to invest about S$10.2m (RM27.5m). While Star’s stake in Cityneon is expected to be diluted from 64% to 51%, it will remain the major shareholder of Cityneon.
What You Should Do
We are turning more positive on Star in view of the better traction in its event and exhibition segment, following a strong performance in FY14. We expect the acquisition to improve Star’s profitability, allowing it to diversify beyond print.
Source: CIMB Daybreak - 03 April 2015
Target RM2.70 (Stock Rating: ADD)
We are positively surprised by Cityneon's (Star’s subsidiary) announcement to acquire Victory Hill Exhibitions (VHE) for a proposed consideration of S$21m (RM57m) that will be funded by cash and shares. Following the deal, Cityneon will own the rights to provide exhibition services to Marvel characters. We view the deal as earnings accretive as it helps to enhance the group’s strength in the event and exhibition segment and mitigate the print segment's persistent decline. We raise our FY15-17 EPS forecasts by 3-6% to account for stronger contribution from Cityneon. We upgrade Star to an Add, with a higher target price of RM2.70, still based on 11.3x CY16 P/E, a 25% discount to the target market P/E of 15x. We see stronger contribution from non-print segment and higher dividend payout as potential re-rating catalysts.
What Happened
Cityneon, a subsidiary of the Star Media Group, announced today it had entered into an agreement with Philadelphia Investment Ltd to buy Victory Hill Exhibitions Pte Ltd (VHE) for a total consideration of S$21m (RM57m) that will be satisfied via cash and shares. VHE holds the rights to provide exhibition services to Marvel until May 2017, including the rights to produce and operate the travelling exhibition called “Marvel’s The Avengers S.T.A.T.I.O.N (Scientific Training and Tactical Intelligence Operative Network)”. In addition, VHE also holds the rights to manufacture, distribute and sell Marvel merchandise at such exhibitions. The deal is expected to be completed by the end of 2Q15.
What We Think
We are positively surprised by the news and excited about Cityneon’s potential in leveraging the Marvel exhibition, as its plans to bring the production to major science museums across the world as well as potential partners in cities across Asia and the US. According to an independent valuer, VHE's indicative fair value is estimated at S$21.1m-25.2m. Meanwhile, Cityneon expects the Marvel exhibition to contribute about S$2.8m-4.5m in the first two years, which is higher than its S$2.3m net profit in FY14. Cityneon is planning to carry out a rights issue to partially finance the deal and Star will need to invest about S$10.2m (RM27.5m). While Star’s stake in Cityneon is expected to be diluted from 64% to 51%, it will remain the major shareholder of Cityneon.
What You Should Do
We are turning more positive on Star in view of the better traction in its event and exhibition segment, following a strong performance in FY14. We expect the acquisition to improve Star’s profitability, allowing it to diversify beyond print.
Source: CIMB Daybreak - 03 April 2015
