This Stock With A Quiet 520% Gain Isn’t Slowing Down Just Yet

There is a company that listed its shares on the local Catalist board in December 2014. In barely two years’ time since its listing, the company’s share price has delivered a 520% gain.

This huge return is accompanied by strong business growth. The company’s revenue of S$16.1 million in fiscal 2014 (fiscal year ended 31 March 2014) has more than doubled to S$38.3 million in fiscal 2016. Its net profit has grown by an even more impressive 198% from S$2.74 million to S$8.18 million over the same period.

As I look at the company’s current development, it appears to be still pushing ahead in growing its business. This company is mm2 Asia Ltd (SGX:43D).

The growth ahead…

mm2 Asia is is most well-known for its blockbuster movie productions such as the Ah Boys to Men series and The Journey, Malaysia’s highest grossing film of all time. Right now, mm2 Asia is trying to grow from a movie production outfit into a full-fledged media company.

mm2 Asia currently has five cinemas in Malaysia and expects to invest more into this area. The company is also expanding overseas, especially in North Asia. Given that most of mm2 Asia’s revenue is currently sourced from Southeast Asia, the expansion into North Asia – in particular China – has solid growth potential.

The company has also caught the eye of StarHub Ltd (SGX: CC3), one of the mainstays in Singapore’s telecommunications industry. Back in March this year, StarHub bought a stake in mm2 Asia.

…But hold your horses

What I’ve described above about mm2 Asia sounds like wonderful news. But, the market appears to have high hopes for the company too. At the current price, mm2 Asia is trading at 43 times trailing earnings and 31 times tangible book value. The company has also not paid a dividend so far since its listing.

Moreover, the company is still predominately a film production company and its success is based on the popularity of its productions. This adds risk to the company’s business, given the need for mm2 Asia to continuously churn out hits.

Foolish Summary

mm2 Asia has interesting high-growth potential in its business. But, investors need to be aware of the company’s lofty valuation and the risks involved in its business when making any investment decision.

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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 writer Stanley Lim does not own shares in any companies mentioned above.