Excerpts from analyst's report

DBS Vickers analyst: Ling Lee Keng

TreasureIsland LVThe permanent exhibition set of Cityneon’s new subsidiary, Victory Hill Exhibitions, is strategically located at Treasure Island hotel in Las Vegas. Photo: DBS Vickers, Company

We had the opportunity to visit Cityneon’s wholly-owned subsidiary, Victory Hill Exhibitions’ (VHE) site in Las Vegas last week to commemorate the opening ceremony of the permanent exhibition set for the Avengers S.T.A.T.I.O.N. The event was well attended and attracted huge media attention, including USA Today, The Star in Malaysia, even before the official opening on 22 June.

Las Vegas attracts approximately 43m visitors in a year and VHE is targeting to secure 1% to 1.5% of that market to visit the attraction. This works out to about 430,000 to 645,000 visitors per year. We have assumed 500,000 visitors in our earnings model.


Creator of innovative and interactive exhibitions, with explosive growth ahead
Trading at a low PE-to-growth multiple of
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; in just the month of June, Victory Hill Exhibitions (VHE) has already announced two additional locations – Australia and Singapore - to host and operate the Avenger S.T.A.T.I.O.N.

Raised our assumption to seven sets by end of 2017

Cityneon Holdings

Share price: 
93.5c

Target: 
$1.20

We believe Cityneon would require more sets to meet the overwhelming demand. We now expect a total of seven sets by the end of 2017, up from six previously, and maintain our assumption of eight sets by the end of 2018. The group operates a relatively low execution risk model as outside the US, it will find partners in the target region to undertake the operating risks.

"Maintain BUY with higher TP of S$1.20. With the additional set assumed in FY17, we have raised our earnings for FY17F and FY18F by 14% and 11% respectively.

"Maintain BUY with higher TP of S$1.20, up from S$1.05, based on peer average PE valuation of 15x FY17F earnings.”

Potential for third IP
There is a huge pool of franchises that meet management’s criteria of box office of >US$1bn and with sequels in the pipeline. Some attractive options include Star Wars, Jurassic Park, Batman and Spiderman.

We expect the VHE team to leverage their credentials in developing the Avengers and Transformers exhibits to leapfrog to the next IP.


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.

Full report here.


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