Major Cineplex Group

Major Cineplex Group Plc (MAJOR)
 

What’s new? According to Boxofficemojo website and our estimates, Thailand’s top-10 movies during April-May 2012 grossed Bt731m, down 16% YoY. Disaggregated by month, April posted a 10% YoY drop, due to the high base set by April 2011 with the screening of King Naresuan 3 (Bt201m). In April 2012, there were only two blockbusters—Battleship (Bt148m) and Wrath of the Titans (Bt79m in total; Bt46m in April).
May reported a 19% YoY dive to Bt418m, led by Avengers (Bt255m) and MIB 3 (Bt80m estimate). In comparison, May 2011 saw the screening of Fast & Furious 5 (Bt148m), Ladda Land (Bt113m), Pirates 4 (Bt108m).
Weak 2Q12 box-office takings: The April box office revenue decline was in line with management guidance of a ticket sales drop for the month. However, the May slump was worse than expected—MIB 3 was not as popular at the box office as anticipated. June box office takings now look set to rise only about 2% YoY, due to the postponement of GI Joe 2 to next year. We estimate around Bt70m from the first three days’ screening of Amazing Spiderman in June. Overall, we forecast an 11% YoY drop in nationwide 2Q12 box office takings to Bt1.07bn.
Estimate 15-20% YoY drop in 2Q12 ticket sales: We assume Bt855-910m in 2Q12 ticket sales for MAJOR, down by 15-20% YoY but up 6-13% QoQ. We maintain our 7-8% total FY12 ticket sales projection unchanged, as the movie line-up for 2H12 is stronger HoH.
5-10% YoY profit slippage: Despite weak 2Q12 ticket sales, we forecast only a relatively modest YoY decline in 2Q12 earnings of Bt265-280m, underpinned by onscreen ad revenue growth of 10% YoY (we assume flat revenues at other business units). OPEX will be well controlled, despite higher electricity costs and the minimum wage increase.
Action: We recommend skipping past weak 2Q12 earnings and focusing on stronger 2H12 numbers, which will be driven by a stronger movie line-up and a full contribution from the Mega Bangna branch. MAJOR’s FY12 PER is 15x—far below its 21.5x long-term mean. It remains our pick in the Media sector.