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 4Q11 grossed Bt727m, up 16% YoY but down 27% QoQ. Disaggregated by month, Oct posted a robust 64% YoY increase, due largely to the low base comparison with Oct 2010 and two Thai blockbusters during the month—30 Sod On Sale (Bt71m in total) and Top Secret (Bt38m in total). Nov reported a 29% YoY tumble, thanks to the high base set in Nov 2010 by Harry Potter 7.1 (Bt147m in total). There was a 32% YoY rise in Dec, underpinned by Twilight 4.1 (Bt105m in total), MI 4 (Bt108m in total) and Sor Kor Sor Sweetie (Bt77m to Jan 15).
Analysis: The 4Q11 box office revenue growth of 16% YoY was well above our expectation, thanks to the strong rebound in Dec. We estimate that MAJOR’s ticket sales for the quarter at Bt670m, up 9% YoY but down 31% QoQ. The temporary closures of 14 locations as a result of the inundation during Oct-Nov simply constituted a short-term negative.
We estimate the shortfall in ticket sales brought about by the closures at Bt250-300m (4-5% of the FY11 top-line) and the shortfall in space rental income from three of the locations at Bt15m (0.2% of the FY11 top-line). Note that our new estimate for onscreen ad revenue is more optimistic than our previous number, as now we assume that it fell only 2% YoY; we earlier estimated a 25-30% YoY plunge, due to the screen closures.
Space rental revenue would have been impacted by location closures and discounts to rents for tenants during 4Q11. In contrast, concession revenue should post a substantial 30% YoY increase. With regard to OPEX, SG&A probably remained high—we expect that associate SF will book a bad debt provision (due to the flooding) and MPIC an inventory impairment. Overall, we estimate a Bt70m net profit for the quarter, down by 73% YoY and 68% QoQ.   
Action: We recommend skipping past the weak 4Q11 earnings and focusing on the 1Q12 rebound. MAJOR’s FY12 PER is 15.5x, far below its 21.5x long-term mean. Discretionary spending will bounce back swiftly in 1Q12. The stock remains one of our top picks in the Media sector.