SINGAPORE (May 16): RHB is maintaining its “buy” call on Spackman Entertainment Group with a target price of 27 cents, while noting that the stock is currently trading at a much lower valuation versus local peers and has a positive outlook.
To recap, the group on Monday announced 1Q earnings of $7.6 million, reversing from its net loss position in the same quarter a year ago after recognising earnings from its blockbuster movie, Master, as well as a US$3 million gain from the disposal of its Spackman Media Group (SMG) shares in relation to its latest acquisition.
“Going forward, we expect its next movie – Golden Slumber, set to hit the big screens in 2H17 – to boost earnings further… With Spackman’s proven track record, we expect the movie to be profitable and estimate a conservative base-case of 4m ticket admissions, which will likely yield US$2.6 million in earnings for the company,” states analyst Jarick Seet in a Tuesday report.
Golden Slumber is a remake of the 2010 Japanese film of the same name based on an Isaka Kotaro novel, and will star top Korean A-listers such as Kang Dong Won and Han Hyo Joo.
Similar to Master, the film is produced by ZIP Cinemas and will be distributed by CJ Entertainment.
(See also: Spackman commences filming for Golden Slumber)
Further, Seet says that the group’s associate SMG, which aims to be listed on the Hong Kong Exchange in 2018, enjoys added credibility to its value with Spackman’s recent acquisition of Korean equipment rental company, Frame Pictures.
(See also: Spackman Media Group seeks Hongkong listing)
He calculates that SMG’s value per share to be between US$4.70 to US$8 under the assumption that the acquisition is priced between 4-6 times FY16 P/E.
On the belief that 2017 is an inflection point for Spackman Entertainment that has seen the group bouncing back to strong profitability this year, Seet thinks there are more M&As in store for the group as Spackman may continue to aggressively pursue strategic acquisitions to develop a more consistent revenue stream.
The proceeds from its recent new share issuance and cash generated from the profit of Master gives it headroom to invest in and produce more movies ahead, he adds.
As at 12.35pm, shares of Spackman are trading 2% lower at 14.6 cents.