Major Cineplex Group

Major Cineplex Group Plc (MAJOR)

 

Investment thesis 

The rise in both Thai and international films lining up to be shown this year boosts our confidence that earnings will recover because the cinema business is resilient, even amid the sluggish economy. Many people are still willing to spend time and money to go the movies, and MAJOR is well positioned to reap upside from this most popular and convenient means of mass entertainment. Two superhero movies will support 1Q16 ticket sales, and we judge that such films are favorites with Thai audiences. Therefore, our BUY rating on MAJOR stands. 

Results recap for 4Q15—in line with estimates 

The firm reported a Bt139m net profit for 4Q15, down 33% YoY and 60% QoQ. Net profit was in line with our model. Stripping out extra items—a net-of-tax gain from selling PVRL shares and trading in SF shares in 4Q14 and 3Q15—core profit would still dive 26% YoY and 41% QoQ. All business units, except concessions, posted YoY revenue falls for 4Q15—ticket sales (down 6%), bowling revenue (down 4%), onscreen advertising (down 3%), space rentals (down 6%) and movie content (down 70%). Concessions rose 11% YoY on the sale of Star Wars bucket sets. The ticket-sales slip was due to a weaker movie line-up, while bowling income dropped YoY with the closure of more alleys. 

Earnings for 1Q16 expected to deliver YoY growth

We preliminarily forecast a Bt190m net profit for 1Q16, down 5% YoY but up 35% QoQ. But, stripping out extra items—a net-of-tax gain from trading SF shares in 1Q15—core profit would rise 15% YoY and 35% QoQ, led by higher average target price (ATP), stronger Hollywood blockbusters, and 12 new screens. The superhero and animated features—Deadpool, Kung Fu Panda 3 and Batman V Superman—will support 1Q16 ticket sales. Its ticket sales rose at a low single digit rate MTD and we expect its ticket receipts to growth 10% YoY in 1Q16. 

MAJOR aims to add 100 new screens in 2016. New cinemas will open this year will in both Bangkok and major provinces across the country. New shopping projects will provide more opportunities for MAJOR’s new cinemas. The firm will focus more on non-film revenue, from which it expects 10% growth in events and out-of-home media business this year—major premiere day events for Kung Fu Panda 3 will be held in 1Q16. It also aims for 12 movies to be produced by MPIC this year.

Deadpool breaks box-office record 

We predict that the Thailand box-office take for the film will be Bt150m. He may be an unlikely hero, but Deadpool saved the day at the box office last weekend. Deadpool debuted satisfactorily, taking more than Bt100m in its first week on screens against Bt60m for Star Wars: The Force Awakens (Bt150m in total) and Bt70m for Mission: Impossible – Rogue Nation (Bt140m in total). It also surprised Hollywood, more than doubling its initial forecasts of a $60 million box office opening.