Major Cineplex Group

Major Cineplex Group Plc 

Investment thesis

Although Oct-Nov top-10 box office takings declined, strong receipts for December will make for a 4Q14 box office rise of 8% YoY. We assume that MAJOR’s 4Q14 ticket sales will post an increase of 16% YoY and its concession revenue a surge of 17% YoY. We are confident in the firm’s prospects for FY15 and beyond, driven by an aggressive screen rollout plan (both domestically and in CLMV countries), a better MPIC performance and cost saving programs. Our BUY rating stands.

YoY rise in October-December top-10 box office takings 

Thailand’s top-10 box office takings for 4Q14 totaled Bt993m, up 8% YoY. October’s takings were Bt234m, down 10% YoY. November’s takings were Bt215m, down 32% YoY. But December’s takings were Bt544m, up 60% YoY. The rise in 4Q14 box office takings was due to a stronger movie line-up. Three films grossed near or over Bt100m for the quarter—The Hunger Games: Mockingjay Part 1 (Bt104m in total), The Hobbit 3: There and back again (Bt97m in Dec; Bt111m in total) and I Fine Thank You Love You (Bt292m in Dec; Bt328m in total).

Insights into 4Q14—earnings to post a YoY jump

We estimate MAJOR’s 4Q14 ticket sales at Bt1.07bn, up 16% YoY (flat QoQ), due to three movies grossing over Bt100m for the quarter. Our model now points to a Bt236m net profit for the quarter, up 115% YoY but down 20% QoQ. Stripping out extra items, core profit should post a jump of 67% YoY but a drop of 20% QoQ. The YoY jump is attributable to a stronger film line-up and the low base set by 4Q13 (due to political turmoil in late 2013). Concession revenue is projected to have risen by 17% YoY and onscreen ad receipts by 2% YoY (note that no sponsor-ship revenue will be booked for 4Q14, as was booked in 4Q13). 

1Q15 earnings to rise YoY and QoQ

Net profit in 1Q15 should rise by 80% YoY and 7% QoQ to Bt253m (cost reductions are expected to clearly manifest in 1Q15), our model indicates, due to the low 1Q14 profit base. The 1Q15 blockbusters include Kingsman: The Secret Service, The Penguins of Madagascar, American Sniper, Fifty Shades of Grey, The Imitation Game, Cinderella and Paranormal Activity: The Ghost Dimension.

Solid movie line-up through FY15

This year will usher in a line-up of Hollywood blockbusters—The Avengers: Age of Ultron, Star Wars VII, Man of Steel: Superman/Batman, Pirates of the Caribbean: Dead Men Tell No Tales, Fantastic Four Reboot, Terminator 5, The Hunger Games: Mockingjay Part 2, James Bond 24, Snow White and the Huntsman 2, Jurassic Park IV, Mission Impossible 5 and Die Hardest.