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 during Jan-Feb 2012 grossed Bt565m, up 21% YoY and up 48% in comparison with Oct-Nov 2011. Disaggregated by month, Jan posted a 34% YoY rise, led by two Thai blockbusters—ATM Er-Rak Error (Bt147m in total) and Sor Kor Sor Sweetie (Bt81m in total). Feb posted a 4% YoY rise, thanks to one Thai movie—Valentine Sweetie (Bt58m in total) and two Hollywood blockbusters—Ghost Rider 2 (Bt46m) and Journey 2 (Bt39m).  
Strong 1Q12 box-office takings: The Jan box office revenue rise of 34% YoY was in line with management guidance of a 35% YoY ticket sales increase for the month. We expect Feb and March numbers to post growth of 4-5% YoY. As such, we roughly estimate a 15% YoY rise in nationwide 1Q12 box office takings. March’s line-up is underpinned by John Carter (Bt60m so far), Wrath of the Titans and Hunger Games. 
Expect 10-15% YoY rise in 1Q12 ticket sales: We estimate Bt775m-800m in 1Q12 ticket sales for MAJOR, up by 10-14% YoY and 19-23% QoQ. That means a ticket sales turnaround since the 4Q11 flooding. We conservatively forecast that total FY12 ticket sales will rise 7-8%, in-trend with FY12 movie industry growth of 7.5%. 
High season for Hollywood movies in 2Q-3Q12: We expect ticket sales during 2Q-3Q12 (which coincides with the Hollywood movie high season) to rise YoY, underpinned by a strong movie line-up for the period and new income with the opening of Mega Bangna (16 screens—the same as the Paragon branch) in May 2012. Due to the lower space rental for Mega Bangna branch—below 10% revenue-sharing (typically 15-25% revenue-sharing at other locations)—we also think ticket sales margin will improve significantly in 2H12.  
Action: We recommend accumulating the stock ahead of the Mega Bangna opening in May, which will boost 2H12 earnings significantly. Furthermore, the movie line-up is strong for the next nine months. MAJOR’s FY12 PER is 17x—far below its 21.5x long-term mean. The stock remains our top pick in the Media sector.