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Major Cineplex Group

Weak Jan-Feb 2013 box office takings BUY

Major Cineplex Group Plc (MAJOR)

Investment thesis

MAJOR's 1Q13 ticket sales will be weak, but we expect a stronger movie line-up from May through 4Q13 featuring 18 Hollywood blockbusters and three Thai movies. Our BUY rating stands, premised on the stock being a laggard play, higher FY13 ticket sales, scope for upside from a theater JV in Cambodia and cost reductions from downsizing its DVD/VCD production unit, as well as a cheap valuation—an FY13 PER of 18x against a 20x long-term mean.

Weak Jan-Feb 2013 box office takings

Thailand's top-10 box office takings during Jan-Feb 2013 were Bt440m, down by 22% YoY and 24% in comparison with Oct-Nov 2012. The top-10 box office takings for Jan posted a 44% YoY dive, while those for Feb reported a 15% YoY rise.

No movies grossed above Bt100m during Jan-Feb 2013—Khun Nai Ho (Bt92m in total; Bt58m in Jan), A Good Day to Die Hard (Bt66m as of March 10; Bt60m in Feb), Hansel & Gretel: Witch Hunters (Bt59m in total), Jack the Giant Slayer (Bt59m as of March10; Bt8m in Feb) and Warm Bodies (Bt50m as of March 10; Bt44m in Feb). Moreover, the Jan 2012 number set a high base comparison with three Thai blockbusters—ATM Err Rak Error (Bt149m in total), Sor Kor Sor Tweetie (Bt81m in total) and Valentine Tweetie (Bt58m in total).

Flattish YoY growth for March expected

We expect, at best, flattish YoY growth in takings for March, underpinned by three Hollywood blockbusters—Jack the Giant Slayer, Oz: the Great and the Powerful (Bt25m in its first week of screening) and G.I. Joe 2: Retaliation (above Bt100m expected). The box office takings for March 2012 featured three blockbusters—John Carter (Bt71m in total), The Hunger Games (Bt64m in total; Bt42m in March) and Wrath of the Titans (Bt78m in total; Bt30m in March). We estimate top-10 total 1Q13 box takings at about Bt700m, down by 15% YoY and 22% QoQ. We assume MAJOR's 1Q13 ticket sales at about Bt680m, down by 15% YoY and 22% QoQ.

Stronger 2Q-4Q13 movie line-up

The weak 1Q13 movie line-up will be followed by a stronger line-up for the final eight months of the year, starting May, we believe. About 18 Hollywood blockbusters and three Thai blockbusters—Tom Yum Koong 2, Koo Kum, and King Naresuan 5—will screen. We expect 10 movies to gross near or over Bt100m each in FY13—G.I. Joe 2, Iron Man 3, Fast & Furious 6, After Earth, Superman: Man of Steel, World War Z, King Naresuan 5, Pacific Rim, Thor 2 and The Hobbit 2.

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