Major Cineplex Group

Buy; Bt13.30

Price Target : Bt17.25 (Prev: Bt16.25)

3Q11 net profit of Bt215m (+0.5% YoY, -27%QoQ) was within our expectation, but 11% below consensus’

Despite the flooding crisis, cinema income grew 30% YoY in Oct and 20% YoY MTD; only 30% of ad booking postponed from 4Q11 to 1Q12 

Earnings recovery in 2012F to be driven by compelling film line-up and higher average ticket price, following more digital screens (c.130 at end-2011 vs c.200 at end 2012)

Reiterate BUY with TP revised up to Bt17.25, pegged to 18x FY12F PE

Comment on Result

3Q11 net profit in line. Cinema income was weaker QoQ in the quarter because of the floods (started in September), and weaker-than-expected ticket sales for Narasuan 4 (Bt136m box office revenue). But ad income was strong at Bt215m (+23% YoY, +13% QoQ) in the quarter, attributed to its successful marketing strategy.

Recommendation

Oct-Nov 11 cinema income up YoY. Despite closing 12 branches due to the floods, cinema revenue grew 30% in October and 20% in the first half of November. This is due to the low base effect and strong film line-up YoY. Film lineup will be even more attractive in December with Twilight, Mission Impossible, Saranaa, and Sor kor sor.

Cut ad income by 30% in 4Q11F. Despite the severe floods, only about 30% of its ad booking will be postponed from 4Q11 to 1Q12. This is much better than we expected.

Reiterate BUY. MAJOR is trading at only 14x FY12F PE, below its 7-year mean of 16x. The expected weaker earnings in 4Q11F and 1Q12F have been priced in, in our view.