Major Cineplex Group

Major Cineplex Group Plc (MAJOR)

Investment thesis
Despite our diminished 3Q12 profit estimate, 4Q12-FY13 earnings will rise on stronger ticket sales. We believe FY13 will be another golden year for MAJOR because 16 blockbuster sequels are scheduled to screen. We recommend overlooking unimpressive 3Q12 numbers and focusing on the upcoming FY13 rebound. Our BUY rating stands.
A modest decline in 3Q12 box office takings
Based on Boxofficemojo website numbers and our estimate, Thailand’s top-10 films at the box office in July-Sept 2012 grossed Bt951m, down by 4% YoY and 9% QoQ. Only three movies grossed close to Bt100m each—The Dark Knight Rises (Bt130m in total), The Amazing Spiderman (Bt138m in total; Bt98m in July) and Resident Evil: Retribution (Bt105m in total). Total Recall, Bourne Legacy, Abraham Lincohn: Vampire Hunter, Dredd and Rak Jed Pee Dee Jed Hon failed to excite theater-goers. 3Q11 box office takings featured blockbusters—Harry Potter 7.2 (Bt202m in total; Bt188m in July) and Transformers 3 (Bt294m in total; Bt220m in July).
Weak 3Q12 earnings estimate
We estimate a Bt200m net profit for 3Q12, down by 7% YoY and 9% QoQ. There was a Bt30m extra gain from an insurance payout for the Salaya location (for 4Q11 flooding damage). Stripping out the extra item, core profit would be Bt170m, down by 17% YoY and 12% QoQ. The new estimate is lower than our earlier forecast of Bt220-230m, thanks to lower ticket sales than previously assumed and higher SG&A because of provisioning for MPIC.
Ticket sales should post a drop of 7% YoY but a rise of 2% QoQ (deeper than Thailand’s box office decline of 4% YoY), while income at other business units will report flat or marginal growth rates. Onscreen ad revenue should have been solid—up by 6% YoY and 4% QoQ—due to a new contract signed at Mega Bangna.
Earnings rebound in 4Q12-FY13
We preliminarily forecast a 4Q12 net profit of Bt251m, up by 211% YoY and 26% QoQ, led by a stronger movie line-up and the low ticket receipts base set by 4Q11 flooding. Further ahead, FY13 will be another golden year for MAJOR, underpinned by 16 blockbuster sequels—Die Hard 5, G.I.Joe 2, Iron Man 3, Fast & Furious 6, Superman: Man of Steel, Thor 2, The Hobbit 2, etc.
FY12 earnings forecast downgrade
We have cut our FY12 net profit forecast by 13% (from Bt1bn to Bt902m) to reflect diminished expectations for 3Q12 earnings, due to lower ticket sales. We have rolled over our target price from YE12 to YE13 and derived a new DCF-based target price of Bt26.