China Consumer Discretionary 16 June 2016 IMAX China Holding (1970 HK) IMAX Chi na Hol ding Target price: HKD50.00 Share price (15 Jun): HKD39.55 | Up/downside: +26.4% Initiation: a box-office hit John Choi (852) 2773 8730 Key beneficiary of China becoming the largest cinema market by 2017
[email protected] Earnings quality expected to improve significantly over 2016-18 Carlton Lai (852) 2532 4349 Initiating with a Buy (1) call and target price of HKD50.00
[email protected] Investment case: We believe IMAX China is one of the most effective Share price performance ways for investors to gain exposure to both growing Mainland discretionary (HKD) (%) incomes and fast-growing box-office revenue. Although the total number of 60 180 movie screens in China quadrupled from 2011-15 (40% CAGR), the 53 158 penetration rate in China, measured in terms of both demand (film 45 135 38 113 attendance per urban capita) and supply (screens per urban capita), has 30 90 remained low compared to other major economies (ie, the US and Korea). Oct-15 Jan-16 Apr-16 We expect overall movie attendance in China to remain on an uptrend for IMAX (LHS) Relative to HSI (RHS) the foreseeable future, with the Mainland movie industry set to overtake the US’s as the world’s largest by 2017. Given that IMAX is by far the most 12-month range 34.25-59.70 recognised brand among the premium offerings in China, IMAX China Market cap (USDbn) 1.81 should remain a key beneficiary of the industry’s growth, whose top line we 3m avg daily turnover (USDm) 7.24 forecast to rise at a CAGR of 22% for 2016-18.