Major Cineplex Group
In line with estimate
Major Cineplex Group Plc (MAJOR)
In line with estimate
MAJOR reported a Bt195m net profit for 3Q12, down by 9% YoY and 11% QoQ. Stripping out a Bt25m insurance payout for 4Q11 flooding at the Salaya location, core earnings would be Bt170m, down by 17% YoY and 11% QoQ. Both net and core profits were in line with our estimates. But sales and gross earnings were 4% and 8%, respectively, below our model, due to lower ticket sales than assumed. GM was a relatively weak 32.5%; we had expected 34%.
Result highlights
The profit slippage was due to lower ticket sales and GM and a deeper loss at MPIC. Ticket sales fell by 13% YoY and 4% QoQ, due to the box office failures of five major films and the high 3Q11 base comparison set by Harry Potter 7.2 and Transformers 3. GM for ticket sales (excl. concessions) fell to 16.2% in 3Q12 (17.5% in 3Q11 and 19.7% in 2Q12)—movie hire costs rose in the absence of any fat-margin MPIC Thai films and OPEX increased with the opening of a new branch at Seacon Bangkae (higher rental and electricity expenses).
MPIC reported a Bt30m net loss for 3Q12 (a 66% proportionate net loss of Bt20m), against a Bt4m net profit for 3Q11, due to a new accelerated amortization policy for movie rights. In gross profit terms, onscreen advertising was the only unit to post a rise—up 4% both YoY and QoQ.
Outlook
The screening of King Naresuan 5 has been postponed to FY13, leaving only three blockbusters in 4Q12—Skyfall, Twilight 4.2 and The Hobbit. We estimate a Bt229m net profit, up by 184% YoY and 17% QoQ. The low SG&A trend should continue in 4Q12. The effect of lower firm hire costs will be significant in FY13. MAJOR targets adding 119 new screens in FY13 for a total of 500 by YE13 (and 600 at YE15). The firm plans to expand to Cambodia by forming a JV with a local theater operator.
Management foresees stronger onscreen ad revenue in FY13 with the renewal of big-account contracts in 2H12—Toyota, Isuzu, KBANK—and the new client, Bangkok Airways. The firm plans to revamp MPIC with the aim of turning it around in FY13. We expect FY13 ticket sales to recover strongly with the screening of 16 Hollywood blockbusters.
What’s changed?
We have revised down our FY12 profit forecast by 3% to Bt875m to factor in a diminished expectation for 2H12 earnings.
Recommendation
Our BUY rating stands, premised on an FY13 ticket sales recovery.
