Major Cineplex

Price Target : Bt16.25

·        Earnings will be weak in 4Q11F-1Q12F due to the floods; a quarter of its screens are temporarily shut

·        Business and properties are insured, although we do not know the extent of coverage for loss of income

·        Earnings should recover from 2Q12F onwards, led by attractive film releases delayed from 4Q11F-1Q12F

·        Trading at only 13.8x FY12F PE, lower than 7-year mean of 16x; reiterate BUY call with TP nudged down to Bt16.25, pegged to 18x FY12F PE (+0.5SD)

Impact of floods. MAJOR has temporality shut down 12 branches so far due to the floods, effectively affecting 103 screens out of its 373 total capacity. The company does not disclose details of insurance coverage for business interruption, but the minimum guaranteed revenue is unlikely to be low.    

Strong traffic at branches outside flooded areas. Box office taking for Thai films“30 Kamlung Jeaw” and “Top secret” have reached Bt60m and Bt40m, respectively. Traffic in upcountry remains strong.

Reiterate BUY. Although 4Q11F and 1Q12F earnings are expected to be weak, the current share price implies the negatives have been priced in. MAJOR is now trading at only 13.8x FY12F PE against its 7-year mean of 16x.