Associate Editor & Senior Columnist

SINGAPORE - The worst is over and the best is yet to come.

That, in the simplest of terms, was the message Mr Melvin Ang, founder and executive chairman of entertainment and content production company mm2 Asia, put across to shareholders at the company&rsquo s annual general meeting (AGM) on July 31.

It would mark a significant turnaround for a company that has been struggling for the past three years, no thanks to the Covid-19 pandemic.

Mainboard-listed mm2 Asia posted a net loss of $15 million (excluding non-cash items such as impairment for its cinema franchise and fair value loss on financial instruments) for the year ended March 2023 (financial year 2023).

This is a significant improvement compared with its $32 million loss in financial year 2022 and $53 million loss in financial year 2021.

The company  owns the Cathay cinema franchise,  which has 90 screens at 12 locations in Malaysia and 44 screens at six locations in Singapore.

The business, purchased in 2017 for around $200 million, has seemed like an albatross around the company&rsquo s neck, bleeding to the tune of $100 million since 2020.

More significantly, it has loaded the company with a huge debt.

But at the AGM, Mr Ang hinted that the business has started to turn around in the current financial year, thanks to cost rationalisation.

Cathay gave up two locations in Singapore and moved to the heartland, where rental is cheaper and there is growing cinema attendance.

The slew of major blockbusters released over the past eight months has helped as well.

The company also controls 39 per cent of Catalist-listed concert and events organiser UnUsUal.

This unit has been having a phenomenal calendar 2023 so far, with many sell-out concerts since the concert business was allowed to resume after the pandemic.

In fact, UnUsUal&rsquo s order book is so heavily booked that it is now having to search for capacity and resources for more events and concerts wanting to head to Singapore.

The event company locked in a profit of some $1.8 million for the year ended March 2023, a huge turnaround from the previous two years&rsquo total accumulated loss of around $13 million.

Given the extremely buoyant market now, market insiders reckon UnUsUal could easily boost its full-year gain to end-March 2024 by some 10-fold.

Another business that mm2 Asia controls is digital and live production company Vividthree Holdings.

The Catalist-listed company, which is 38 per cent controlled by mm2 Asia, is also seeing a huge resurgence in opportunities, thanks to a surge in demand for digital content and Mice (meetings, incentives, conferences and exhibitions) events.

mm2 Asia itself is deeply into Asian language content production for international and regional streaming platforms.

It has a significant regional presence in markets such as Malaysia, Hong Kong, Taipei and China.

Income from content production, script development, distribution, consultancy and copyright have increased significantly over the past year.

So the operating environment has improved notably for the company.

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After struggling the past three years as cinemas and entertainment outlets shuttered amid the pandemic, the need for people to be physically surrounded by sound, light and music is at fever pitch.

Movie-going attendance and the number of concerts are higher than they have been at any time in the past five years.

Meanwhile, Mice events have taken off.

The enthusiasm for entertainment  appears to be a global phenomenon.

For example, American entertainment organiser Live Nation (which is handling the sold-out Coldplay concert in Singapore) has seen its operating income and stock price surge in 2023 as people rushed back to concerts worldwide.

Its stock price on Wall Street has risen almost 30 per cent since the beginning of 2023, giving it a market capitalisation of almost US$20 billion (S$27 billion).

In Singapore,  the rush for tickets to concerts  by the likes of Coldplay, Taylor Swift, Jackie Cheung, Blackpink and others hog the headlines.

Indeed, this is the first time in four years that all four of mm2 Asia&rsquo s businesses are figuratively flying high.

Setting aside the writedowns in its last set of results, the company is seeing a pick-up in operating profitability in its core divisions.

In any case, 2022&rsquo s results are in the rearview mirror.

More importantly, the quarterly numbers to end-June, and the view ahead, suggest that operating momentum and numbers remain strong.

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Interestingly enough, mm2 Asia&rsquo s auditors have recently removed their earlier qualification on the company&rsquo s ability to remain a going concern.

This lifts the requirement for the company to post quarterly results.

Now MM2 has to report only half-yearly and full-year results.

While mm2 Asia&rsquo s profit and loss statement looks set to rebound nicely in 2023, there are still concerns about its balance sheet.

The company is sitting on debt of around $200 million, comprising convertible bonds and working capital.

Excluding its working capital line of credit, listed subsidiaries&rsquo working capital lines and convertible loans, this debt is reduced to less than $90 million.

However, Mr Ang insists the company has the wherewithal to manage this debt.

As he pointed out to shareholders, mm2 Asia has total disposable assets of some $100 million.

He also unveiled that the improving operating numbers have opened the door for group refinancing options ahead.

In any case, offsetting the $90 million debt with the $110 million market cap of mm2 Asia and its $80 million stake in UnUsUal should not pose a serious challenge for MM2.

The company could also consider disposing of its cinema business for anywhere in the region of $100 million.

Could 2024 then be the big turnaround year for the mainboard-listed company?

At least three savvy notable investors &ndash tycoon Oei Hong Leong, &ldquo Popiah King&rdquo Sam Goi and Osim&rsquo s Mr Ron Sim, who together control almost 18 per cent of MM2 &ndash still seem to have faith in Mr Ang and his company.

That said, even as the market turns in mm2 Asia&rsquo s favour, the company will still have to manage its gearing.