Major Cineplex Group

Major Cineplex Group Plc (MAJOR) 

 

Investment thesis

 

Despite the softer-than-expected 2Q15 ticket sales related to the failure of MAJOR’s two Thai movies—Pa Happy and Cha-Lui—and lower-than-estimated revenue from Hollywood blockbusters in May, we estimate that its 2Q15 ticket sales will likely grow 4-8% YoY and its 2Q15 core profit should rise 4% YoY, led by the exceptionally higher concession and onscreen ad revenues, lower film-hire cost and other cost-control measures. Eight movie blockbusters and stronger onscreen ad revenue will underpin YoY 2H15 earnings growth. Our BUY rating stands. 

Thailand’s top-10 box-office revenue growth of 18%, April-May 

Based on Entertain Weekly magazine’s Thailand Box-Office Report, the country’s top-10 box-office revenue totaled Bt1.01bn during April-May 2015, up 18% YoY. Broken down by month, April’s was Bt597m, up 56% YoY and May’s was Bt415m, down 12% YoY (against our previous estimate of a 25% YoY rise for May). Fast & Furious 7 (Bt387m in total; Bt382m in April) and King Naresuan 6 (Bt117m in total; Bt111m in April) drove the box-office revenue jump in April. 

In May, there was only one strong film—Avengers: Age of Ultron (Bt289m in total; Bt239m in May)—but it was unable to save the May number. Others had poor takes for the month—Mad Max: Fury Road (Bt49m), Tomorrow Land (Bt41m) and Pa Happy (Bt14m). San Andreas debuted satisfactorily with Bt38m in its first week of screening during the last week of May. We estimate that San Andreas and Pa Happy will end up with gross takings of Bt75m and Bt18m, respectively. The latter was another flop from M39, a MAJOR content subsidiary.

Softer-than-expected 2Q15 ticket sales 

We estimate Thailand’s top-10 box-office takings for June to reach Bt380m, down 33% YoY, given the high June 2014 base comparison and a few strong movies in the June 2015 lineup. There will be only one Hollywood blockbuster in June 2015—Jurassic World—while June 2014 featured three—Transformers 4 (Bt172m), King Naresuan 5 (Bt127m) and Maleficent (Bt125m). We expect Cha-Lui from Transformation Films (a JV between MAJOR and others), which debuted in June, also to lose at the box office by grossing less than Bt50m. It will be the third offering from the production house to have bombed after a Single Lady and Tukkae Ruk Paeng Mak. 

Overall, we forecast that the 2Q15 top-10 box-office takings will total Bt1.39bn, down 2% YoY. We forecast that MAJOR’s ticket sales will be Bt1.5-1.55bn for 2Q15, up 4-8% YoY, which will be lower than our previous expectations of a 15-17% YoY rise for 2Q15. We preliminarily estimate the record Bt492m core profit, up 4% YoY and 199% QoQ and Bt502m net profit, up 13% YoY and 153% QoQ, for 2Q15.