mm2 is an integrated movie producer, providing services over the entire filmmaking process. It generates revenue from 3 main sources – production, distribution and sponsorship. The group is riding on growing demand and support for local production, and is also gaining tractions in overseas market like China, Taiwan and HK.
To broaden its revenue stream, mm2 has recently acquired five cinemas in Malaysia. The ownership of cinemas will provide a source of recurring income to the group and cost savings in the longer term. We value the company at 18x on FY Mar17 EPS, a 30% discount to peers, given its much smaller size. Based on this, we arrive at a fair value of $0.84. The stock is currently trading 14x FY17PE.