Major Cineplex Group

Major Cineplex Group Plc (MAJOR)  

 

Investment thesis 

The 2H15 earnings outlook remains positive due to stronger YoY rises in ticket sales—led by a solid blockbuster line-up, sustained high average ticket price (ATP) and screen expansion—onscreen ad revenue and well-controlled OPEX. Lao and Cambodian market prospects will be earnings catalysts in the next five years. Our BUY rating stands, on the solid YoY earnings rise from 2H15 through FY16. 

Results recap for 2Q15—slightly above estimate 

MAJOR reported Bt491m net profit for 2Q15, up 10% YoY and 147% QoQ. Excluding extra items—the Bt49m net-of-tax gain from trading SF shares and a Bt0.25m gain from asset disposals—core profit was Bt442m, down 7% YoY but up 168% QoQ. Net and core profits exceeded models by 7% and 5%, respectively, thanks to higher revenues—concessions, onscreen ads and movie content—and GM than assumed. Onscreen ads led the highest revenue growth of 17% YoY—due to screen expansion (22 screens in four locations), sale by movie strategy and EmQuartier’s Bt20m naming rights revenue—followed by ticket sales (7%) and space rentals (3%). 

ATP was Bt171, up 13% YoY and 7% QoQ, led by the price hike and halting of bundled promotions. Movie content revenue fell 53% YoY due to the 2Q14 high base over the 2Q14 movie-rights sale to MONO. 

Strong ticket sales prospects in 2H15 

July’s ticket sale rose 5% YoY and its August 1-10 ticket sales jumped 30% YoY. We estimate a 10% YoY rise in 3Q15 ticket sales, underpinned by the low Aug-Sept ticket sales base and the Hollywood blockbusters grossing over Bt100m/title—Terminator 5 (Bt105m), Minions (Bt115m), MI5 (Bt150m) and Ant-Man (Bt105m). It remains to be seen whether GTH’s Thai movie, Freelance, will make money. Ticket sales for 4Q15 will post a YoY rise, led by the low 4Q14 base, blockbusters (Spectre, Star Wars 7 and Hunger Games-Mockingjay 2), two Thai movies, sustained high ATP and 74 new screens in 14 locations, with three prominent ones—Central West Gate, Central East Ville and The Promenade. It aims to add 80-90 new screens in FY16.

More promising Lao and Cambodian markets in FY16-17  

We conservatively estimate a 15% YoY rise for onscreen ad revenue for FY15, led by the remaining Bt40m from naming rights sponsors at EmQuartier in 2H15, the locations listed above and special events. We think that Laos (which opened on Aug 7, 2015) and Cambodia (which opened in 3Q14) will be the FY16-17 overseas revenue drivers, driven by strong movie-goer traffic in both countries, penetration of a second location in Cambodia by partnering with BigC and the future business model to conduct film distribution in both countries. We estimate a Bt320m net profit for 3Q15, up 9% YoY but down 35% QoQ.