Excerpts from analyst's report

DBS Vickers analyst:  Ling Lee Keng

Creator of innovative and interactive exhibitions, with explosive growth ahead. At a low PE-to-growth of <0.1x with explosive FY15-FY18F EPS CAGR growth of close to 300%, Cityneon is attractive to investors seeking growth and unique ideas in the entertainment industry.

An expanding project pipeline, plans to add rights to a third Intellectual property rights (IP), and potential tie-ups with strategic investors like CMC Holdings are catalysts for the stock.


Share price: 

Scalable business model with low execution risk. Cityneon’s earnings are directly correlated with the number of exhibits it has. So far, it has two permanent sets in Las Vegas and another two travelling sets; we expect a total of six sets by end-2017 and eight sets by 2018. The group operates on a relatively low execution risk model as outside the US, it will find partners in the target region to undertake the operating risks.

Potential for third IP, to tap on other Walt Disney franchises. There is a huge pool of franchises to be tapped under the Disney umbrella, aside from the Marvel franchise. Some attractive options include Star Wars, Jurassic Park, Batman and Spiderman. We expect the Victory Hill Exhibitions (VHE) team to leverage their credentials in developing the Avengers and Transformers exhibits to leapfrog to the next IP.s.

Earnings to improve from FY16F
"Earnings for FY16 should jump with the incorporation of VHE. Thereafter, a ramp-up in operational sets will drive earnings growth. We have not factored in the potential of a third IP. Our TP of S$1.05 is based on peer average of 15x FY17F earnings."

-- Ling Lee Keng

Key Risks to Our View:
VHE’s limited track record. VHE was formed in 2012 and the first exhibition was in New York in 2014.

Earnings dependent on number of visitors. A higher number of visitors would enable the group to generate higher royalties. Ancillary sales are also dependent on the number of visitors.

Full report here.