Major Cineplex Group

Major Cineplex Group Plc (MAJOR)

Investment thesis
We recommend skipping past flattish 1Q13 earnings and accumulating the stock ahead of stronger 2Q13 numbers—we expect a record bottom-line, due to the hit movie Pee Mak Prakanong, which has grossed over Bt500m so far, and two Hollywood blockbuster sequels—Iron Man 3 and Fast & Furious 6. Our BUY rating stands, premised on MAJOR being a laggard play, an FY13 earnings jump and a discounted valuation—an FY13 PER of 18.9x against a 20x long-term mean.
A modest decline in 1Q13 box office takings
We estimate Bt796m in 1Q13 top-10 box office takings, down by 4% YoY and 11% QoQ. The modest assumed YoY decline is because only two movies grossed near or above Bt100m in 1Q13—Pee Mak Prakanong (Bt102m in March; Bt514m to April 28) and Jack the Giant Slayer (Bt76m in total). In comparison, three blockbusters grossed near or over Bt100m in 1Q12—ATM Er-Rak Er-ror (Bt148m in total), Sor Kor Sor Sweetie (Bt81m in total) and John Carter (Bt70m in total).
Anticipate record box office takings in Q2 2013
We expect record 2Q13 top-10 box office takings of above Bt1.3bn, underpinned by six blockbusters—the surprise hit Pee Mak Prakanong (the remaining Bt420m in April-May), Iron Man 3, Fast & Furious 6, After Earth, Superman: Man of Steel and World War Z. Khu Kam failed at the box office, grossing only Bt47m up to April 28. Oblivion grossed only Bt53m during its three-week screening to April 28. The previous record for top-10 box office takings was Bt1.2bn in 2Q11. The quarter was driven by six blockbusters—King Naresuan 3, Fast & Furious 5, Ladda Land, Pirates of Caribbean 4, X-Men 4 and Transformers 3.
Expect flattish YoY 1Q13 core profit
We estimate a Bt195m net profit for 1Q13, down 16% YoY but up 18% QoQ. Stripping out extra items—a Bt30m gain from trading SF shares in 1Q13 and other extra items in both 1Q12 and 4Q12—our core earnings projection comes to Bt165m, up 2% YoY but down 19% QoQ. The flattish expected YoY core profit is due to flattish revenue. The QoQ drop is thanks to declines in ticket and concessions sales (a weaker movie line-up), bowling and onscreen ad revenues (low season).
We estimate that ticket sales will post only a 1% YoY rise, thanks to the weak movie line-up for 1Q13. In contrast, concession revenue should post a 20% YoY jump, led by a new sales strategy. Bowling and space rentals will report modest YoY declines. Onscreen ads will post a 5% YoY rise. SG&A will have increased 8% YoY in the absence of expenses at MPIC following the winding up of its MVD business last year.