One of my favourite pastimes would be watching comedies together with my wife. And one recent film that we both thoroughly enjoyed was the local production Ah Boys to Men 3: Frogmen, a comedy about National Servicemen in the Republic of Singapore Navy’s elite Naval Diving Unit. Given the film’s topic on National Service (something close to the hearts of many Singaporeans) and judging from its box-office success, I think it’s safe to say that many other Singaporeans, like me, had thoroughly enjoyed the laugh-fest. Being the inquisitive sort that I am, I dug deeper into the film’s background…
One of my favourite pastimes would be watching comedies together with my wife. And one recent film that we both thoroughly enjoyed was the local production Ah Boys to Men 3: Frogmen, a comedy about National Servicemen in the Republic of Singapore Navy’s elite Naval Diving Unit.
Given the film’s topic on National Service (something close to the hearts of many Singaporeans) and judging from its box-office success, I think it’s safe to say that many other Singaporeans, like me, had thoroughly enjoyed the laugh-fest.
Being the inquisitive sort that I am, I dug deeper into the film’s background after watching it.
While I initially had the impression that the film was solely a production from director Jack Neo’s company, J Team Productions Pte Ltd, I soon found out that Ah Boys to Men 3 was actually a co-production between J Team and a recently listed company, MM2 Asia Ltd (SGX: 41C).
Here are some interesting things about MM2 Asia’s business that I discovered.
1. MM2’s history and business
Founded in 2008, mm2 Asia is a homegrown moviemaker that counts popular titles like Cafe. Waiting. Love (one of my wife’s favourite movies!), the Ah Boys to Men series, and The Journey, under its stable of movies.
The company’s revenue comes from three segments:
- Movie Production (40% of MM2 Asia’s total revenue in the financial year ended 31 March 2014 (FY2014)) – This is where the company earns fees for “securing financing for a production from Stakeholders who have acquired a share of the production/movie’s revenue rights”. Besides that, the firm also earns production fees by providing its services in areas that include script development, cast and crew appointment, principal photography, post-production management, and consultancy.
- Distribution (40%) – This segment records revenue that MM2 Asia earns from distributing movies that are either produced/co-produced by the company or third parties through different channels (like airlines, DVD, local and overseas cinemas etc.). In addition, MM2 Asia also gets to earn income through various forms of licensing.
- Sponsorship (17%) – In this segment, MM2 Asia charges advertisers fees for product placements in the company’s movies.
While film-makers might not be that common, there’s one other company listed in Singapore that belongs to the same field: Spackman Entertainment Group Ltd (SGX: 40E). The South Korea-based film producer invests in and distributes theatrical films in South Korea and other parts of the world. You can find out more about Spackman here.
2. MM2 Asia’s management
MM2 Asia’s chief executive, Melvin Ang, is a seasoned professional in the media industry.
Some of his past stints in the industry include a role as 1) Vice President, Business Development for the Television Corporation of Singapore (what is now MediaCorp) from 1997 to 2000, and 2) Managing Director of MediaCorp Studios from 2003 to 2007.
Ang, as a 63% owner of MM2Asia, would also likely have his interests closely aligned with that of his company’s other shareholders.
3. Moving up the movie value chain
Despite the recent success of Ah boys to Men 3, MM2 Asia is not resting on its laurels. In a recent announcement made just last Wednesday, the company revealed that it has entered into an agreement to buy a 51% stake in Vividthree Production, an award-winning 3D animator.
This acquisition, which was first announced back in March, had been done to expand MM2 Asia’s reach into other areas of the film production value chain by adding 3D animation capabilities.
Here’re some comments from Ang on the deal with Vividthree:
“This proposed acquisition is a big step forward for mm2 Asia as we embark on our expansion plans across North Asia… 3D animation is an exciting and growing field in the movie industry. With this additional capability, mm2 Asia will be well positioned to capture new markets, customers and opportunities. We are very happy to work with Vividthree, one of Singapore’s top companies in this specialised area.”
According to MM2 Asia’s listing prospectus, the firm’s revenue has grown at a remarkable pace of 56.6% per year from S$6.6 million in FY2012 to S$16.1 million in FY2014. Along the way, its net profit has ballooned from just S$93,000 to S$2.74 million.
The company’s balance sheet, while certainly not the strongest, also seems passable given that it had S$601,000 in cash with only S$1.1 million in borrowings (as of 31 March 2014).
MM2 Asia last traded at S$0.28 on Monday; at that price, it’s valued at 9.7 times its trailing earnings.
A Fool’s take
Investing in a movie-making business would likely come with big ups and downs.
A high-budget movie that turns into a box-office dud can easily lead a film maker to suffer huge losses. That said, the opposite is also true – a string of popular hits can do wonders for a film-making outfit.
All told, an investment into MM2 Asia would depend on a host of factors, with some really important ones being the strength of its existing movie franchises and the quality of the films in its pipeline of upcoming-movies.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.