mm2 Asia Ltd Is Near A 52-Week High – Can It Continue Soaring In 2016?

Singapore’s stock market hasn’t done too well of late with the Straits Times Index (SGX: ^STI) closing yesterday at 2,846 points, around 19.8% lower than a 52-week high of 3,550 that was reached in April.

But, that doesn’t mean that all stocks have had a rough time too. mm2 Asia Ltd (SGX: 41C), which had its initial public offering (IPO) only on December 2014, would be one share that has bucked the trend. At their closing price of S$0.85 yesterday, mm2’s shares have climbed by 240% from their listing price of S$0.25 and are a mere 3.5% away from a 52-week high of S$0.88.

Founded in 2008, mm2 is a media company focusing on movie and content production. It 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 motion pictures.

By leveraging on its position as a producer, mm2 is also involved with other aspects of the film making business such as securing financing, distributing other movies via various platforms, and securing advertising and sponsorships.

In fact, the company derived more than half of its revenue in FY2014 (fiscal year ended 31 March 2014) from the activities mentioned just above. You can read more about the company in here too.

While mm2’s shares are near a peak today, there are reasons possibly pointing to further room to climb. Here’re a few:

  • Melvin Ang, mm2’s chief executive, has many years of experience in the media industry through his past stints as 1) Vice President, Business Development for the Television Corporation of Singapore (now MediaCorp) from 1997 to 2000, and 2) Managing Director of MediaCorp Studios from 2003 to 2007.
  • mm2 is broadening its suite of services. In the first-half of 2015, the company had purchased a 51% stake in Vividthree Productions, a “leading player in Singapore’s three-dimensional (“3D”) animation field.” The acquisition would allow mm2 to “diversify and expand into complementary business areas within the film production value chain” with the addition of 3D animation capabilities.
  • Meanwhile, mm2 has also been moving downstream into the cinema business through the acquisition of cinemas in Malaysia. The rationale, as explained by Ang, is this: “The cinema business is a great way for the company to produce a stream of recurring income and adds to the future growth in the company.”
  • Last but not least, mm2 has been showing some pretty impressive growth on both its top-line and bottom-line. Over the past four years from FY2012 to FY2015, revenue has soared by almost 370% while earnings have spiked mightily from S$93,000 to S$5.1 million.

Foolish Takeaway

Investors are often troubled by the fact that shares at record highs may drop or pull back a great deal after any perceived euphoria is over.

But, it’s good to note that there’s no point in relying on a share’s 52-week high or low to make investing decisions. It’s far more important to dig deep into the share’s business fundamentals and think about its future five, 10, or even 20 years from now.

While it’s a good thing to see that mm2 has a number of positive things going for its business, a deeper look into other aspects of its business is needed before any investing decision can be reached.

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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.