In-Depth Analysis of Major Cineplex’s 3Q24 Results and Future Prospects

Tuesday, 12 November 2024

Company Overview

Major Cineplex is a leading cinema operator that also engages in related businesses such as bowling, karaoke, rentals, cinema media, and film distribution. This diversified business model has allowed Major Cineplex to maintain a strong foothold in the entertainment industry.

Stock Data

The current share price of Major Cineplex is Bt14.10 with a target price of Bt19.00, indicating a potential upside of 34.80%. The company operates within the Communication Services sector and is listed on Bloomberg under the ticker MAJOR TB. The company has 829.1 million shares issued, with a market cap of Btm 11,525.0 (US\$m 370.7). The 3-month average daily turnover is US\$m 0.8.

Price Performance

Over the past year, Major Cineplex’s share price has seen fluctuations with a 52-week high/low of Bt16.40/Bt11.70. The performance metrics show a decline of 12.6% over the past month, 17.8% over the past three months, but a positive growth of 6.3% over six months, 7.0% over one year, and 2.0% year-to-date.

Major Shareholders

• Mr. Vicha Poolvaraluck: 30.0%
• Thai NVDR: 7.7%
• Major Cineplex Group: 7.3%

3Q24 Results

Major Cineplex reported 3Q24 earnings of Bt50m, representing a 52% year-on-year decline and an 80% quarter-on-quarter decline. This was primarily due to seasonality and weaker performance of Hollywood movies. The decrease in other revenues, particularly admission revenue, also contributed to the lower earnings. Despite this, the company expects a significant recovery in 2025 driven by a higher number of blockbuster releases and strong momentum in Thai movies.

Financial Performance

Analysis of Revenue

Revenue for 3Q24 dropped to Bt1,660m, a 5% year-on-year and 18% quarter-on-quarter decline. Admission revenue was Bt783m, down 4% year-on-year and 26% quarter-on-quarter, attributed to the low season and fewer popular Hollywood movies. Popular movies in 3Q24 included “Deadpool & Wolverine” (Bt178m), “The Paradise of Thorns” (Bt93m), “Out of The Nest” (Bt35m), “Despicable Me 4” (Bt34m), and “Alien: Romulus” (Bt26m). Concession revenue also dropped to Bt399m, an 11% year-on-year and 26% quarter-on-quarter decline, due to lower admission revenue and the absence of marketing promotions. However, revenue from bowling and rental services saw an increase, with bowling revenue at Bt134m (up 9% year-on-year and 20% quarter-on-quarter) and rental revenue at Bt66m (up 10% year-on-year and 3% quarter-on-quarter).

Stock Impact and Future Prospects

Looking ahead, Major Cineplex expects moderate earnings growth in 4Q24, driven by higher admission revenue from Thai movies, such as “Tee Yod 2”, and distribution to overseas markets. The company will also benefit from movie content revenue from collaborations between M-Studio and BEC. Additionally, several Hollywood and Thai movies are scheduled for release, further supporting earnings. However, earnings are expected to remain flat year-on-year due to a high base of Thai movies in 4Q23.

For 2025, Major Cineplex anticipates significant earnings growth due to a higher number of blockbuster releases and continued positive momentum of Thai movies. The company expects an increase in gross profit margin from higher average ticket prices and higher margins from the concession revenue segment. Additionally, revenue from movie content is expected to rise due to more collaboration projects with strong entertainment companies in Thailand and international media companies.

Valuation and Recommendation

UOB Kay Hian maintains a BUY recommendation for Major Cineplex with a target price of Bt19.00. This target price is based on the 2025F EPS and pegged at 16x PE, equivalent to its three-year mean. The positive outlook for 2025 earnings, driven by a higher number of blockbusters and strong performance of Thai movies, supports this recommendation. Additionally, Major Cineplex is expected to be less impacted by slower improvement in advertising expenditure compared to its peers, as its core business still relies on TV adex.

Environmental, Social, and Governance (ESG) Initiatives

Major Cineplex has undertaken several ESG initiatives:

• Environmental: The Green Cinema Project raises awareness on environmental conservation and promotes the use of natural materials.
• Social: The company focuses on creating convenience and safety for customers, adding security measures to protect personal information, and developing skills for employees while ensuring a safe working environment.
• Governance: The Board of Directors complies with the Good Corporate Governance of the Stock Exchange of Thailand, consistent with the ASEAN CG Scorecard.