Major Cineplex Group

Major Cineplex Group. Plc (MAJOR)

Slightly lower core earnings: MAJOR posted a Bt218m net profit for 2Q12, down by 26% YoY and 6% QoQ. Stripping out Bt26m in after-tax extra gains—mostly from selling SF shares—core profit would be Bt192m, down 31% YoY but up 19% QoQ. Net profit was 7% above our number, due to extra gains (we didn’t assume extra gains). Core profit was 6% below our estimate because of higher SG&A than expected.
Results highlights: The YoY core profit plunge was driven by: 1) lower ticket sales (several big films proved disappointing) and DVD/VCD distribution revenue and 2) higher SG&A with the minimum wage increase. All business units except onscreen ads and space rentals posted YoY income declines—ticketing fell by 18% YoY, DVD/VCD distribution by 17%, concessions by 4% and bowling by 2%. But onscreen ad and space rental revenues posted rises of 16% YoY and 15% YoY, respectively.
Concessions achieved a record concessions/ticket sales ratio of 28% (against 24% in both 1Q12 and 2Q11). Onscreen ad revenue posted a 16% YoY rise with a new strategy of selling ads by the movie. In gross profit terms, all business units except bowling and onscreen ads posted YoY drops—DVD/VCD distribution fell by 70%, ticketing by 26% and concessions by 4%. Gross profit expanded by 13% YoY for onscreen ads and by 16% YoY for bowling (with the closure of unprofitable branches). The average ticket price (ATP) was Bt150, up by 3% YoY and 6% QoQ.
Outlook: The firm guides that July ticket sales posted a single-digit YoY dip. August ticket sales will flatten YoY and Sept’s will post a YoY rise. Management maintains its FY12 ad revenue growth target of 10% with higher receipts in 2H12, underpinned by contract renewals and the possible signing of a big-name sponsor for Mega Bangna in 2H12. Ticket sales margin will start rising in 3Q12, due to a lower film hire cost. We forecast a Bt220-240m net profit for 3Q12, up 2-10% YoY.
What’s changed? We maintain our FY12 net profit forecast unchanged.
Recommendation: Our BUY rating stands, premised on 2H12 profit expansion, led by a stronger film line-up.