Barely two years after they first emerged as substantial shareholders of mm2 Asia 1B0 , corporate bigwigs Oei Hong Leong and Sam Goi may well end up as the new controlling owners of the media and entertainment group, once its latest cash call is done and dusted.
The company announced on Sept 29 a one-for-two rights issue at 2 cents a share to raise between $27.3 million and $34.9 million to pare debt and fund working capital. As Oei and Goi are fully backing the exercise, their stakes will swell to 22.57% and 20.93% from 8.45% and 6.81%, respectively, if no one else subscribes for the new shares.
mm2 has been aggressively tapping investors for funds to shore up its balance sheet after the Covid-19 pandemic wreaked havoc on its business which spans movie and TV drama production, live concerts and cinemas. Besides placements and rights issues, it has raised cash via convertible bonds and warrants.
Oei and Goh first invested in mm2 in February last year through a placement that raised $19.5 million, the bulk of which was used for working capital. Not long before that, Osim founder Ron Sim became a substantial shareholder through a rights issue that raised $54.6 million, nearly all of which went to paring debt. Sim’s current 5.84% stake makes him the fourth-largest shareholder after founder and executive chairman Melvin Ang, who owns 22.02%, followed by Oei and Goi.
On the face of it, the backing of Oei, Goi and Sim ought to make mm2 a formidable force. All three are powerhouses in their own right, having built enviable business empires in Singapore and beyond. The entertainment business, however, is one that is arguably new to all three of them although Sim is a cornerstone investor in another Singapore Exchange S68 -listed entertainment company, GHY Culture & Media. Beyond their financial clout, what they bring to the table is unclear at this point.
Goi is known more for his knack for real estate and F&B. Besides chairing property developer GSH Corporation BDX , he has either invested in or is a director of other SGX-listed companies such as JB Foods BEW , Tung Lok Restaurants 540 (2000), Envictus International BQD and PSC Corporation DM0 .
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Oei, too, is big on property, although his interest spans many other sectors. One of his more recent investments is A-Smart Holdings BQC , which raised $5.4 million from him through a share placement last December. The deal made Oei the second-largest shareholder in the printing and recycling firm formerly known as Xpress Print.
Given mm2’s multiple fundraising exercises over the last few years, it would not be inconceivable for minority shareholders to sit out this rights issue as investor fatigue could have already set in. Throw in the dilutive impact of those cash calls — the latest rights issue is at a 50% discount off the last traded price — plus the company’s continued loss-making streak and high debt burden, investors can be forgiven for looking elsewhere for better bets.
At the close of its FY2023 ended March 31, which marked its third straight year of losses, mm2 had $8.9 million in cash and with a current debt ratio of 1.1, just enough to meet its short-term obligations. Net gearing was lofty at 2.4 times.
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As borrowing costs have shot up amid rising inflation, investors will naturally demand a higher risk premium as well as greater assurance that any additional money they put in will yield an above-average return and one they will not wish to wait too long for.
Against this backdrop, it will be interesting to see how Oei and Goi can help return the company to its glory days should they be the only ones subscribing for the rights shares.
Once a darling of the stock market, mm2 was recognised by Forbes in 2016 as one of only two Singapore companies among the top 200 in Asia worth under US$1 billion. Just three years after its trading debut on Catalist in 2014, it upgraded to the mainboard of SGX. By then, it had completed two stock splits to make its shares more affordable. It also demonstrated its financial acumen by spinning off UnUsUaL 1D1 in 2017 and Vividthree Holdings OMK the following year.
mm2’s share of misses, meanwhile, has been just as pronounced. The most notable is possibly its failure to float its portfolio of cinemas based in Singapore and Malaysia. First announced in December 2020, the plan entailed listing the cinema business on Catalist and merging it with Golden Village. All that came to naught after the pandemic decimated movie-going and SGX ruled that the cinema business was substantially similar to mm2’s main trade.
Minority shareholders ought to study the circular for the rights issue once it is available. They should also question Oei and Goi about their game plan for mm2 at the EGM the company will convene to seek their support. Not doing so and forgoing their rights shares could mean passing up the chance to join the two corporate fat cats in riding what could be mm2’s long-awaited turnaround.
The writer is a former financial journalist and runs an investor relations consultancy practice. He is also a part-time business journalism lecturer at a Singapore university. All views expressed are solely his
