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Major Cineplex

The pasture is green, the sky is blue

Major Cineplex Plc (MAJOR)

Event

- We maintain an Outperform rating on MAJOR with an unchanged target price of Bt28. MAJOR remains our top pick in the media space given its dominant position in Thailand's cinema industry and long-term structural growth. We view the stock as attractive on 18x PER given 16% EPS CAGR in 2013-14E and 5% dividend yield.

Impact

- Structural growth supported by expansion in the provinces: We continue to like MAJOR on the back of strong structural growth, supported by its expansion in the provinces. We believe provincial cinemas may offer better returns on investment compared to Bangkok locations due to their lower rent, lower capex and higher con-to-box. Together with growth in advertising revenue and higher con-to-box (concession sales as % of admissions), we believe this will drive 16% EPS CAGR in 2013-14.

- Unhindered by competition: In our view, MAJOR faces much less competitive pressure in the cinema industry compared to BEC and MCOT in broadcasting. The company dominates Thailand's cinema industry with over 60% market share. Looking forward, we believe MAJOR still holds advantages over peers given its partnership with hypermarket players that enable it to expand aggressively into the provinces.

- Strong box office results: In the near term, strong box office results in 2Q-3Q13E will be key catalysts for the stock. We expect over 50% box office growth in 2Q13 while 3Q13 to date is already tracking 25% ahead of last year's.

Earnings and target price revision

- No change.

Price catalyst

- 12-month price target: Bt28.00 based on a DCF methodology.

- Catalyst: Box office results, quarterly results

Action and recommendation

- MAJOR is our top pick in the Thai media sector. The stock trades on 18x PER while offering 16% EPS growth over 2013-14E and paying out 5% dividend yield. We maintain an Outperform rating on the stock with target price unchanged at Bt28.




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