Major Cineplex Group

Major Cineplex Group Plc (MAJOR)

What’s new? According to Manager Online, Boxofficemojo website and our estimates, Thailand’s top-10 movies in 3Q11 grossed Bt992m, up 2% YoY but down 17% QoQ. Disaggregated by month, July posted a robust 47% YoY increase, underpinned by Transformers 3 (Bt220m in July; Bt294m in total), Harry Potter 7.2 (Bt188m in July; Bt202m in total), Captain America (Bt34m in July; Bt74m in total) and Poom Puang (Bt35m in July; Bt43m in total). However, a 19% YoY fall was posted for August and 28% YoY plunge for Sept. In August, only one movie grossed above Bt100m—King Naresuan 4 (Bt130m in total). In Sept, all Thai and Hollywood movies failed at the box office—none grossed anywhere near Bt100m (the best performer was Johnny English Reborn (Bt63m so far). 

Analysis: MAJOR’s subdued Sept ticket sales were due to a weak line-up and widespread flooding. Although none of its theaters flooded, the bad weather discouraged movie-going. The inundation has persisted into October, but we expect that ticket sales bottomed out in Sept and will rise this month on a better line-up. Oct ticket sales should post a YoY rise, due to the very low base comparison set by Oct 2010. We estimate Bt915m in ticket sales for 3Q11, up 5% YoY but down 15% QoQ. Given the low base set by 4Q10 ticket sales and a stronger 4Q11 movie line-up—MI 4, King Naresuan 5 and Twilight 4.1—we estimate at least a 20% YoY rise in ticket sales for the quarter.

With regard to the 3Q11 net profit, we preliminarily anticipate that MAJOR will post somewhere in the region of Bt240-250m, up 12-17% YoY but down 15-18% QoQ (the movie line-up in 2Q11 was very strong). We model for solid YoY revenue increases across all business units—5% for ticket sales and 17-20% for both onscreen advertising and DVD/VCD distribution.   

Action: Our BUY rating stands. MAJOR has been heavily oversold by the market—its FY12 PER is now just 10.7x against a 21.4x long-term mean. The stock is clearly deserving of investor re-entry as a domestic play that won’t be affected by the global economic downturn, nor will the establishment of the NBTC make any difference to its profitability dynamics.