Thailand Total Access Communication RE-INITIATE COVERAGE Thailand
Major Cineplex Group
(MAJOR.BK/MAJOR TB)*
Neutral Re-initiate Positive factors are in the price Event Price as of 28 Mar 2017 33.75 We re-initiate coverage on MAJOR with a 2017 target price of Bt37.00 and a rating of Neutral. 12M target price (Bt/shr) 37.00 Unchanged / Revised up (down) (%) N.A. lmpact Upside/downside (%) 9.6 A major cinema operator in Thailand MAJOR is a major player in Thailand’s cinema industry in both market share and number of Key messages branches and screens. In 2016, the company had revenue market share of more than 70%, We expect MAJOR’s 2017-2018 earnings to surge followed by SF Corporation Plc. which provides cinema services under the brands SF World, with CAGR of 25% on the back of i) revenue SFX and SF Cinema. At the end of 2016, MAJOR had 113 branches with 678 screens while SF growth in cinema business (core business), ii) blooming advertising revenue along with branch had around 50 branches with 300 - 350 screens. expansion, and iii) margin improvement. Core business has rosy outlook However, our 2017 target price of Bt37.00 offers The company’s cinema business (core business), which contributes around 72% of revenues, only 9.6% upside from the current market price. has a solid outlook from 2017 onward. Ticket sales are expected to increase by 10% in 2017- Thus, we re-initiate coverage on MAJOR with a rating of Neutral. 2018 to Bt5.3bn and Bt5.8bn, respectively, on the back of i) larger number of guests along with screen expansion in the vicinity of 50-70 screens/year coupled with a strong movie line up Trading data from Hollywood, and ii) increased average ticket price from Bt166 to Bt171 (+3% YoY). Mkt cap (Btbn/US$mn) 30.1/755 Core earnings to increase at 25% CAGR during 2017–2018 Outstanding shares (mn) 894.5 MAJOR’s 2017 core earnings are expected to surge 35% YoY to Bt1.09bn, driven by i) 10% YoY Foreign ownership (mn) 435.2 growth in cinema business, ii) blooming advertising revenue (+15% YoY) along with the 3M avg. daily trading (mn) 2 recovery in the advertising industry and the company’s increased number of screens making it 52-week trading range (Bt) 27.25 – 35.50 more attractive to media agencies and business owners, and iii) margin improving from 36.2% Performance (%) 3M 6M 12M in 2016 to 39.8% on increased revenue and the end of segments that contributed losses, such Absolute 0.7 11.6 17.4 as some bowling branches and VCD, DVD distribution. Core profit is expected to grow a Relative -2.7 5.2 3.8 further 16% YoY in 2018 to Bt1.27bn.
Quarterly EPS Valuation and action Bt 1Q 2Q 3Q 4Q Our target price for 2017, which is based on the DCF method (WACC 6.8%), is Bt37.00, offering 2014 0.16 0.50 0.33 0.23 an upside of only 9.6% from the current market price. Meanwhile, we expect a dividend yield 2015 0.22 0.55 0.38 0.16 of 3.7% for 2017. We rate MAJOR, Neutral due to the limited upside to our target. However, 2016 0.25 0.61 0.37 0.10 there is short term catalyst from seasonality, as historical data indicates MAJOR’s earnings
usually hit the peak in 2Q. Share price chart
38 30 Risks
36 20 Weaker than expected revenue from movie line up in 2017. 34 32 10 Key financials and valuations 30 0 28 Dec-14A Dec-15A Dec-16A Dec-17F Dec-18F (10) 26 Revenue (Bt mn) 8,623 8,580 8,745 9,622 10,535 24 (20) Mar-16 Jun- 16 Aug-16 Nov-16 Jan- 17 Mar-17 Gross Profit (Btmn) 3,148 3,028 3,165 3,827 4,286 Sh ar e Pr i ce Price performance relative to SET EBIT (Btmn) 1,084 1,015 753 1,200 1,410 Source: SET Net Profit (Btmn) 1,086 1,171 1,188 1,313 1,490 Normalized Profit (Btmn) 952 890 808 1,093 1,270 EPS ( Bt ) 1.22 1.31 1.328 1.450 1.645 DPS ( Bt ) 1.05 1.15 1.20 1.25 1.35 EPS growth (%) 3.0 7.5 1.2 9.2 13.4 P/ E ( x) 22.7 26.9 24.7 23.3 20.5 P/ B ( x) 3.87 4.73 4.36 4.36 4.16 EV/ EBITDA ( x) 10.8 14.0 14.9 12.9 11.3 Net debt/Equity (x) 0.6 0.7 0.7 0.6 0.5 PiyathidaSonthisombat Dividend yield (%) 3.8 3.3 3.7 3.7 4.0 66.2658.8888 Ext.8852 Return on Average Equity (%) 17.4 18.0 17.8 19.1 20.7 [email protected] Source: KGI Research
Key investment themes
*The Company may be issuer of Derivative Warrants on these securities. 1 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
A leader in Thailand’s cinema industry: MAJOR is considered a leader in the industry, as it has the largest revenue market share, at more than 70%, with the greatest number of screens in Thailand (678 screens at the end of 2016). Having the largest number of screens would enhance MAJOR’s capacity to accommodate moviegoer traffic when blockbuster movies are released. Moreover, having the largest market share in the industry is likely to enhance the company’s bargaining power with movie owners and attract agencies and business owners to advertise on the company’s screens.
Cinema revenue to be boosted by strong movie line up in 2017: There are more blockbuster movies from Hollywood (expected to bring high box office revenue) lined up in 2017 than in 2016. We believe that MAJOR’s 2017 revenue from cinema business is likely to show impressive growth boosted by ticket sales and concession sales.
Core earnings growth expected at 25% CAGR 2017-2018: We anticipate MAJOR’s core profit to increase to Bt1.3bn in 2017 (+35% YoY) thanks to revenue growth from its cinema business, core business (+10% YoY) and advertising business (+15% YoY). Growth for its cinema business is expected to come from a larger number of guests resulting from a strong movie line up and the company’s branch expansion plan. Meanwhile, its advertising business is expected to bloom with the recovery in the advertising industry, including advertising in cinema.
Outstanding among peers: We believe that the positive factors have been priced in MAJOR’s share price. Currently, MAJOR is trading at PER of 23x implying close to +1 SD, which is lower than regional peers that are traded at PER of almost 33x while the company’s 2017 core profit is expected to grow 35.3%, or above the average regional growth of 30.5% for 2017.
Seasonality is a short-term catalyst to robust profit growth in 2Q17: Based on historical data, MAJOR’s share price usually rises along with the company’s earnings that always peak in 2Q.
Figure 1: Regional peer comparison Ticker Country Mkt Cap. Norm EPS growt h PER PBV Div. yield USDmn 2017F 2018F 2017F 2018F 2017F 2018F 2017F M A JOR TB Thailand 877 35.3 16.2 23.3 20.5 4.4 4.2 3.7 002739 CH China 9,680 38.3 31.3 32.8 25.0 5.3 4.5 0.7
601595 CH China 2,010 25.4 23.2 46.5 37.7 5.5 4.7 - 300528 CH China 1,360 31.8 33.5 51.1 38.2 2.9 2.8 - 3636 HK China 590 21.4 23.1 13.0 10.5 NA NA - Average 2,903 30.5 25.5 33.3 26.4 4.5 4.0 0.9
Source: KGI Research , Bloomberg
A leader in cinema in Thailand
*The Company may be issuer of Derivative Warrants on these securities. 2 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
MAJOR was established in 1995 as a cinema complex provider. The company has expanded into other businesses that enhance its cinema business. Currently, its businesses can be categorized into five groups;
i) Cinema business: To provide more movies at the same time, MAJOR’s cinema business decided to provide multiplex cinemas with more than three screens per branch. By the end of 2016, MAJOR had 12 brands for its cinema business providing 678 screens. It is considered the leader in Thailand’s cinema industry with the greatest number of screens.
ii) Advertising business: Operated by Major Cine Ad Co., Ltd, the company’s subsidiary provides advertising media in MAJOR’s cinemas, such as screen ads and VDO walls.
iii) Bowling business: MAJOR provides bowling and karaoke at its bowling branches. In 2016, the company had 15 bowling branches (14 branches are in Thailand and 1 branch is in Cambodia) with 290 lanes and 174 karaoke rooms. Moreover, MAJOR has launched ice skating at five of its branches.
iv) Rental space business: MAJOR manages some of the spaces at its cinema branches to rent. At the end of 2016, MAJOR had a total of 50.6K sqm to rent with an occupancy rate of 90%. Its key customers are KFC, MK, McDonald’s, Black Canyon and B2S.
v) Movie content business: The business imports movies, produces Thai movies to display on cinema screens and also sells the rights on those movies to home entertainment providers.
In 2016, MAJOR’s cinema business (core business) represented 72% of its total sales and service revenues, followed by its advertising business that accounted for 15%.
Figure 2: Core revenue comes from cinema business Figure 3: Advertising business delivered highest profit
Breakdown 2016 revenue by business, percent Breakdown operating profit by business, Bt mn 850 750 650 Ci nema 550 450 71.6 350 250 150 14.7 50 Advertising (50) (150) 5.5 (250) 4.9 3.3 Ret ai l Ci nema Advertising Ret ai l Bowl i ng Movie content Movie content Bowling 2014 2015 2016
Source: Company data Source: Company data
Cinema business: A key to push growth
*The Company may be issuer of Derivative Warrants on these securities. 3 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
A cinema service provider with the largest market share
MAJOR is a leader in Thailand’s cinema industry as it has the largest number of brands, branches, screens and market share. By the end of 2016, MAJOR had 12 brands of theaters, 113 branches (110 branches are in Thailand and 3 branches are in Cambodia and Laos) with 678 screens (662 screens in Thailand and 16 screens in neighboring countries). MAJOR’s business models for its branches can be broken down into two groups;
i) Standalone complex: To provide areas in the company’s own buildings for cinema and bowling services. The residual areas are set to be rented to others and as a promotion hall. Currently, there are five standalone models located at Pinkloa, Ratchayothin, Sukhumvit, Rangsit and The Explanade Ngamwongwan- Kaerai ii) Branches: To rent area in shopping malls to provide cinema services. If the rental areas are large enough, MAJOR will provide both cinema services and bowling services. Currently, MAJOR’s rental spaces come from;
a. Lifestyle malls: The Esplanade Ratchada, Mega Bangna, rented from Siam Future Development Plc. (SF.BK/SF TB), MAJOR’s affiliated company.
b. Department stores: Mainly rented from Central Plazas, Robinsons and Emquartier.
c. Hypermarket: Mainly rented from BigC Supercenter (BIGC.BK/BIGC TB) and Tesco Lotus.
Having the most branches, MAJOR’s market share was more than 70% of ticket sales in the first week of each movie shown in 2016 while the residual market share went to SF Cinema (the second largest cinema operator in Thailand) and others.
Figure 4: Thailand’s cinema market share Figure 5: The two major players’ no. of branches in Thailand
Market share (ticket sales of each movie in first week), percent Number of branches, branches
110 91 MAJOR 76 68 56 51 46 37 40 70 30
30 2012A 2013A 2014A 2015A 2016A SF Cinema and others MAJOR group SF Ci n ema
Source: Company data Source: Company data
Figure 6: Brands under MAJOR’s operation Figure 7: MAJOR’s screens
Breakdown MAJOR’s screens by areas, percent
-Major Cineplex -EGV Cinemas 1.3 2.0 2.4 -Paragon Cineplex -Mega Cineplex 28.8 38.6 40.2 42.1 47.1 -Quartier Cineplex -Westgate Cineplex
-Paradise Cineplex -Hatyai Cineplex 71.2 61.4 58.5 55.9 -Esplanade Cineplex -Cineplex 50.6
2012A 2013A 2014A 2015A 2016A International Provincial BKK & Vi ni ci t y
Source: Company data Source: Company data
Admission sales to be boosted by screen expansion and strong movie line up
Based on historical data (2014-2016), we found that most of MAJOR’s cinema revenues, around 77%, came from admission sales. Moreover, admission sales grew along with screen expansion and big blockbusters each year. Despite Thailand’s mourning period,
*The Company may be issuer of Derivative Warrants on these securities. 4 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
particularly one month of extra programs from October 13, 2016, onward, MAJOR’s admission sales grew 6% YoY to Bt4.8bn thanks to an increase in the number of guests to 29.7mn (+4% YoY) along with 77 new screens and higher average ticket price of Bt166 (+1% YoY).
For 2017, we believe that MAJOR’s admission sales have a brighter outlook. The number of guests and average ticket price are both expected to continue to increase due to i) screen expansion for 2017-2018 targeted to penetrate in provincial areas with an additional 50-70 screens each year (+7% - 10%), ii) stronger movie line up from Hollywood in 2017, which is expected to attract more guests and push average ticket price up, particularly in Bangkok and its vicinity. We estimate admission sales to increase by 9.5% YoY to Bt5.3bn in 2017 and 10.1% YoY to Bt5.8bn in 2018.
Figure 8: Breakdown of cinema revenue Figure 9: Guests and average Ticket Price (ATP)
Breakdown cinema revenue by segment, percent Number of guests, mn (LHS); average ticket price, Bt (RHS)
35 173 175 22.6 23.2 23.0 23.9 24.0 171 34 170 166 33 33.7 165 165 32 32.1 160 31 77.4 76.8 77.0 76.1 76.0 155 30 30.7 151 150 29 29.7 28 28.5 145 2014A 2015A 2016A 2017F 2018F 27 140 2014A 2015A 2016A 2017F 2018F Concession Admi ssion sal e
Source: Company data, KGI Research Source: Company data, KGI Research
Figure 11: Episode blockbuster movies expected to make high Figure 10: MAJOR’s movie line up for 2017 revenue again in 2017
Movie Released in Worldwide box office revenue
(US$mn)
Rogue One : A Star Wars Story 2016 1,055
Star Wars : The Force Awakens 2015 2,068
Fast & Furious7 2015 1,516
Fast & Furious6 2013 789
Transformers : Age of Extinction 2014 1,104
Guardians of the Galaxy 2014 773
Dawn of the Planet of the Apes 2014 711
The Amazing Spider Man 2014 709
Thor : The Dark World 2013 645
Source: Company data Source: Box Office Mojo
Concession sales to increase along with number of guests
As concession sales come mainly from popcorn and soft drink sales in the cinema areas, revenues from this segment rise with moviegoer traffic. Historical data of the past three years indicate concession sales accounted for 29.6-31.4% of its admission sales (box office
*The Company may be issuer of Derivative Warrants on these securities. 5 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
revenue). For 2017-2018, we anticipate Con-To-Box to increase to 32% as the company plans to improve its packaging design for bucket sets to boost sales. Coupled with our forecast for 2017-2018 admission sales to rise to Bt5.2bn and Bt5.8bn respectively, we estimate concession revenue to increase to Bt1.62bn in 2017 (+12% YoY) and Bt1.81bn in 2018 (+11% YoY).
Figure 12: Concession sales-to-box office (Con-To-Box) Figure 13: Concession sales
Con-To-Box, percent Concession sales, Bt bn 33.0 2.0 1.8 32.5 1.6 32.0 1.4 31.5 1.2 31.0 1.0 0.8 30.5 0.6 30.0 0.4 29.5 0.2 0.0 29.0 2014A 2015A 2016A 2017F 2018F 2014A 2015A 2016A 2017F 2018F
Source: Company data Source: Company data, KGI Research
Advertising business: To help boost margin
Having the largest number of screens spread throughout Thailand, MAJOR is attractive to media agencies and business owners for advertising their services/products on the company’s screens. We foresee robust growth for the company’s advertising revenues in 2017-2018 due to i) recovery in the advertising industry after being impacted by slow economic growth and the country’s mourning period in 2016, and ii) the company’s additional number of screens along with targeted screen expansion plan. We estimate MAJOR’s 2017-2018 advertising revenues to surge 15% YoY and 11% YoY, respectively. In addition, the increased revenue from advertising is expected to boost the company’s net profit as this segment always contributes a high margin of 86-87%.
Figure 14: Advertising industry to recover along with economy Figure 15: MAJOR’s advertising revenue
Advertising spending industry growth, percent Advertising revenue, Bt bn (LHS); gross margin, percent (RHS) 15.0 2.0 100.0 10.0 80.0 1.5 5.0 60.0 0.0 1.0 (5.0) 40.0 (10.0) 0.5 20.0 (15.0) 0.0 0.0
2017F 2018F 2014A 2015A 2016A 2017F 2018F 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A GDP growth (nominal) Ad spending growth Advertising revenue Gross margin
Source: Company data, KGI Research Source: Company data, KGI Research
Other businesses: Improvement expected from 2017 onward
We believe that MAJOR’s other businesses (bowling, rental and movie content) have a brighter outlook compared to 2016. The reasons are i) better margin expected from movie content segment as the company targets to scale down its home entertainment segment (VCD, DVD distribution) that made loss, and iii) its bowling segment is likely to show steady growth in revenue after locations that made loss were gradually closed during 2014-2016.
*The Company may be issuer of Derivative Warrants on these securities. 6 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
Figure 16: Bowling revenue Figure 17: Rental revenue
Bowling revenue, Bt mn (LHS); gross margin , percent (RHS) Rental revenue, Bt mn (LHS); occupancy rate, percent (RHS) 500.0 40.0 550.0 94.0 400.0 38.0 500.0 300.0 36.0 91.0
200.0 34.0 450.0 88.0 100.0 32.0
0.0 30.0 400.0 85.0 2014A 2015A 2016A 2017F 2018F 2014A 2015A 2016A 2017F 2018F Rent al revenue Occupancy rat e Bowling revenue Gross margin
Source: Company data, KGI Research Source: Company data, KGI Research
Core earnings expected to increase at 25% CAGR in 2017-2018
We anticipate MAJOR’s 2017-2018 core profit to increase to Bt1.09bn (+35% YoY) and Bt1.27bn (+16% YoY), respectively. The CAGR for 2017-2018 is forecasted at 25%. Our estimates are based on the following key assumptions:
- Cinema business: We anticipate MAJOR’s cinema revenue to rise to Bt6.9bn in 2017 and to Bt7.6bn in 2018, an average increase of 10.2%. Key factors expected to boost cinema revenue are admission sales and concession sales. Admission sales are likely to be pushed by i) increase in the number of guests from 29.1mn to 30.9mn in 2017 and 32.9mn in 2018, along with screen expansion from 678 screens at the end of 2016 to 801 screens in 2018, and ii) higher average ticket price, from Bt166 in 2016 to Bt171 in 2017 and Bt173 in 2018. Concession sales would rise along with the increased number of guests and bucket redesign.
- Advertising business: This business is expected to grow from Bt1.29bn in 2016 to Bt1.48bn in 2017 (+15% YoY) and to Bt1.64bn in 2018 (+11% YoY). Key drivers would be a recovery in the advertising industry and a greater number of screens, which is expected to attract ad spending from agencies and business owners.
- Other businesses: All of the company’s non-core businesses (rental, bowling and movie content) are expected to improve, particularly the bowling business and movie content business. Rental business is expected to continue to contribute sustainable revenue due to a high occupancy rate of more than 90% while improvement in the movie content business expected from 2017 onward after ending home entertainment sales (VCD and DVD) that made loss over the past five years. Meanwhile, revenue from its bowling business is expected to have steady growth.
- Gross margin is estimated to rise from 36.2% in 2016 to 39.8% in 2017 and 40.7% in 2018 due mainly to larger revenue base.
- SG&A is expected to increase around 9% in 2017-2018 along with branch expansion from 113 branches to 148 branches in 2018.
Figure 18: Revenue and core profit Revenue, Bt bn (LHS); core profit, Bt bn (RHS)
*The Company may be issuer of Derivative Warrants on these securities. 7 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
12.0 1.4
10.0 1.3
8.0 1.2
6.0 1.1
4.0 1.0
2.0 0.9
0.0 0.8 2014A 2015A 2016A 2017F 2018F
Source: Company data, KGI Research
Figure 19: Key assumptions
Key assumptions 2015A 2016A 2017F 2018F Revenue (Btmn) 8,580 8,745 9,622 10,535 Ci nema 5,920 6,264 6,901 7,607 -Admission 4,545 4,821 5,281 5,816 -Concession 1,375 1,443 1,620 1,791 Advertising 1,224 1,287 1,480 1,643 Bowling 454 429 449 453 Rental 522 477 492 502 Movie content 460 288 300 330 Revenue (Percent) Ci nema 69 72 72 72 -Admission 53 55 55 55 -Concession 16 17 17 17 Advertising 14 15 15 16 Bowling 5 5 5 4 Rental 6 5 5 5 Movie content 5 3 3 3 Cinema business -Number of branches 91 113 133 148 -Number of screens 601 678 748 801 -Number of guest 28.5 29.7 32.1 33.7 -Average t i cket pri ce 165 166 171 173
Source: Company data, KGI Research
Strong financial status to continue to support high payout ratio
By the end of 2016, MAJOR had total assets of Bt14.7bn with 52% being fixed assets its license for digital TV business, 19% being investment in joint venture, and 9% being trade account. The company’s total debts amounted to only Bt8bn, 66% of which was interest bearing debt or Bt5.3bn. The company’s financial status is considered strong as its equity stood at Bt6.7bn with the net gearing of only 0.7x. In addition, MAJOR’s payout ratio in the past three years stood at a high level of 86-90%.
Hence, we expect a higher dividend for 2017-2018 as the company’s financial performance is expected to get stronger thanks to growth in earnings that push greater equity and hefty cash flow.
Figure 20: Net gearing Figure 21: Dividend and dividend yield Net gearing, times Dividend, Bt (LHS); dividend yield, percent (RHS)
*The Company may be issuer of Derivative Warrants on these securities. 8 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
0.8 1.6 4.5 0.7 1.4 4.0 1.2 3.5 0.6 3.0 1.0 0.5 2.5 0.8 2.0 0.4 0.6 1.5 0.3 0.4 1.0 0.2 0.2 0.5 0.0 0.0 0.1 2014A 2015A 2016A 2017F 2018F 0.0 Dividend Dividend yield 2014A 2015A 2016A 2017F 2018F
Source: Company data, KGI Research Source: Company data, KGI Research
Valuation and recommendation We valued MAJOR using the DCF method (based on WACC 6.8% and growth of 2%). Our target price for 2017 is Bt37.00, which offers only 9.6% upside from the current market price. We re-initiate coverage with a rating of Neutral.
Short-term catalyst from seasonality There is a short-term catalyst from seasonality as 2Q is the high season for Thailand’s cinema industry and usually boosts MAJOR’s profits and lead to a rally in the share price. Three years of historical data show that MAJOR’s earnings peaked every 2Q. Moreover, MAJOR’s stock price had a pattern of climbing since early in the year and hitting the first peak in June-July. Meanwhile, the second round of price increase was in November- December.
Figure 22: MAJOR’s movie line up in 2Q16
Source: Company data
Figure 23: Cinema revenue and earnings always peak in 2Q Figure 24: MAJOR’s share price
Cinema revenue growth and net profit growth, percent Price index 250 180 200 150 160 100 140 50 0 120 (50) (100) 100 (150) 80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Cinema revenue Net profit .,-0 .,-1 .,-2
Source: Company data, KGI Research Source: Company data, KGI Research
*The Company may be issuer of Derivative Warrants on these securities. 9 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
Figure 25: Company profile Figure 26: Business structure
Major Cineplex Group Public Company Limited (MAJOR) is a leading cinema M AJOR service provider in Thailand with largest market share of more than 70%. The company also provides other businesses that are advertising business, bowling Cinema operation business, rental business and movie content business. The company’s core Bowling and karaoke services revenue comes from cinema business which represented 72% of total sales and services revenue in 2016, followed by advertising business that accounted Advertising and media services for 15%. Rental and services
Movie content
Source: Company data Source: Company data
Figure 27: Total sales and services revenue Figure 28: Cinema revenue Breakdown revenue, percent Breakdown cinema revenue, percent 2.2 2.9 2.9 3.0 2,500 10.2 9.1 7.2 6.6 7.6 4.2 7.8 6.5 4.4 4.6 5.0 6.1 3.9 5.6 6.2 4.9 5.9 6.4 7.6 4.1 5.9 6.3 5.3 5.4 5.4 7.5 4.3 5.9 6.1 5.3 12.4 6.5 6.0 12.8 13.5 2,000 11.0 12.9 15.2 17.2 14.9 12.4 16.2 14.7 16.4 1,500
73.9 71.6 76.4 63.3 70.7 64.7 68.0 64.2 64.6 70.5 68.9 68.8 1,000
500
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 0
Movie content Rent al Bowl i ng Advertising Ci nema 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Source: Company data Source: Company data
Figure 29: Advertising revenue Figure 30: Net profit usually hit the peak in 2Q Advertising revenue, Bt mn Net profit, Bt mn 400 600 350 500 300 400 250
200 300
150 200 100 100 50
0 0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Source: Company data and KGI Research Source: KGI Research
Figure 31: Company’s PER Figure 32: Company’s PBV PER, times PBV, times
35.0 7.0
30.0 6.0 +2.0 sd = 27.9x 25.0 5.0 +2.0 sd = 5.0x +1.0 sd = 24.2x 20.0 4.0 +1.0 sd = 4.3x Average = 20.5x Average = 3.6x 15.0 -1.0 sd = 16.7x 3.0 -1.0 sd = 2.9x -2.0 sd = 13.0x 10.0 2.0 -2.0 sd = 2.2x
5.0 1.0 .,-/ .,-0 .,-1 .,-2 2017F 2018F .,-/ .,-0 .,-1 .,-2 2017F 2018F
Source: Bloomberg, KGI Research Source: Bloomberg, KGI Research
*The Company may be issuer of Derivative Warrants on these securities. 10 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
Quarterly income statement Mar-14A Jun-14A Sep-14A Dec-14A Mar-15A Jun-15A Sep-15A Dec-15A Mar-16A Jun-16A Sep-16A Dec-16A Income Statement (Bt mn) Revenue 1,703 2,643 2,153 2,124 1,749 2,666 2,189 1,976 1,936 2,787 2,127 1,896 Cost of Goods Sold (1,116) (1,616) (1,350) (1,393) (1,145) (1,653) (1,450) (1,305) (1,265) (1,669) (1,347) (1,300) Gross Prof i t 588 1,027 803 730 604 1,013 739 671 672 1,118 779 596 Operating Expenses (448) (520) (540) (555) (445) (527) (525) (516) (514) (601) (595) (701) Other incomes 13 12 16 14 12 12 13 15 13 12 13 13 Operating Profit 152 520 278 189 172 498 228 170 170 529 197 (92) Depreciation of fixed assets (309) (311) (306) (320) (309) (287) (338) (292) (262) (310) (311) (330) Operating EBITDA 461 831 584 509 481 785 566 462 432 839 509 239 Non-Operating Income 34 18 82 42 68 85 165 14 80 105 179 163 Interest Income 2 3 3 4 2 5 1 (1) 1 2 0 2 Other Non-op Income 33 15 79 39 66 80 164 15 79 103 179 162 Non-Operating Expenses (45) (43) (41) (43) (41) (39) (37) (38) (38) (35) (34) (37) Int erest Expense (45) (43) (41) (43) (41) (39) (37) (38) (38) (35) (34) (37) Other Non-op Expenses ------Net investment Income/(Loss) 39 46 52 62 52 72 73 40 58 77 69 53 Pre-tax Profit 181 540 371 250 251 616 428 186 270 675 411 88 Current taxation (41) (97) (81) (51) (51) (120) (83) (46) (37) (119) (73) (8) Minorities 0 3 3 9 (2) (6) (2) (1) (7) (12) (5) 5 Extraordinary items ------Net Profit 140 446 293 207 199 491 343 139 226 544 333 85 EPS ( Bt ) 0.16 0.50 0.33 0.23 0.22 0.55 0.38 0.16 0.25 0.61 0.37 0.10 Margins (%) Gross profit margin 34.5 38.9 37.3 34.4 34.5 38.0 33.8 34.0 34.7 40.1 36.6 31.4 Operating margin 8.9 19.7 12.9 8.9 9.8 18.7 10.4 8.6 8.8 19.0 9.3 (4.8) Operating EBITDA margin 27.1 31.4 27.1 23.9 27.5 29.5 25.9 23.4 22.3 30.1 23.9 12.6 Net profit margin 8.2 16.9 13.6 9.7 11.4 18.4 15.7 7.0 11.7 19.5 15.6 4.5 Growth (%) Revenue growth 1.8 6.3 22.6 18.3 2.7 0.9 1.7 (7.0) 10.7 4.5 (2.9) (4.1) Operating growth (90.9) (79.1) (84.2) (89.5) 12.7 (4.2) (18.0) (9.8) (0.8) 6.2 (13.5) (153.8) Operating EBITDA growth (72.4) (66.6) (66.7) (71.7) 4.2 (5.4) (3.0) (9.2) (10.1) 6.8 (10.2) (48.3) Net profit growth (93.4) (86.5) (86.4) (89.7) 42.0 10.0 16.9 (33.0) 13.8 10.9 (3.0) (38.6)
Source: KGI Research
Peer comparison – Key valuation stats 18F EPS Target price Current 16 EPS 17F EPS 18F EPS 17F EPS growth 17F PER 18F PER 17F PBV 18F PBV 17F Div 17F ROAE Ra t i ng (Bt ) pr i ce (Bt ) Upside (%) (Bt ) (Bt ) (Bt ) growth (%) (%) (x) (x) (X) (X) Yield (%) (%) WORK OP 66.00 55.25 19.5 0.48 1.39 2.02 191.3 45.6 39.8 27.4 6.8 6.1 1.8 18.2 M A JOR* N 37.00 33.75 9.6 1.33 1.45 1.65 9.2 13.4 23.3 20.5 4.4 4.2 3.7 19.1 RS* UR NA 8.75 NA (0.10) 0.14 0.29 NM 109.5 63.9 30.5 6.6 5.8 14.3 3.9 MONO UR NA 3.48 NA (0.08) 0.08 0.13 NM 60.3 44.6 27.8 4.5 4.0 0.0 18.2
Source: KGI Research, Bloomberg consensus
*The Company may be issuer of Derivative Warrants on these securities. 11 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
Balance Sheet Profit & Loss
As of 31 Dec (Bt mn) 2014A 2015A 2016A 2017F 2018F Year to 31 Dec (Bt mn) 2014A 2015A 2016A 2017F 2018F Tot a l Asse t s 13,932 14,246 14,725 15,024 15,861 Revenue 8,623 8,580 8,745 9,622 10,535 Curre nt Asse t s 2,382 2,030 2,350 2,562 3,536 Cost of Goods Sold (5,475) (5,553) (5,580) (5,795) (6,249) Cash & ST Investments 577 312 531 625 1,220 Gross Prof i t 3,148 3,028 3,165 3,827 4,286 Operating Expenses (2,064) (2,013) (2,412) (2,627) (2,876) Inventories 154 183 98 144 211 Other incomes - - - - - Accounts Receivable 1,307 1,181 1,256 1,299 1,580 Operating Profit 1,084 1,015 753 1,200 1,410 Ot hers 343 355 465 494 525 Depreciation of fixed assets 1,211 1,226 1,214 1,163 1,296 Non-current Assets 11,551 12,216 12,375 12,462 12,325 Operating EBITDA 2,296 2,241 1,967 2,363 2,706 LT Invest ment s 3,424 3,575 3,553 3,527 3,503 Non-Operating Income 232 384 579 356 359 Net f i xed Asset s 6,730 7,358 7,591 7,659 7,516 Interest Income 12 7 4 5 5 Ot hers 1,397 1,283 1,231 1,275 1,307 Other Non-op Income 220 378 574 351 354 Total Liabilities 7,546 7,598 8,007 8,007 8,509 Non-Operating Expenses (173) (155) (144) (165) (171) Current Liabilities 4,542 5,480 6,420 5,466 6,004 Int erest Expense (173) (155) (144) (165) (171) Accounts Payable 1,899 1,908 1,761 1,924 2,318 Other Non-op Expenses - - - - - ST Borrowings 2,376 3,389 4,494 3,364 3,493 Equity Income/(Loss) 199 237 256 277 293 Ot hers 267 183 165 178 193 Pre-tax Profit 1,342 1,482 1,444 1,668 1,891 Current taxation (271) (300) (237) (334) (378) Long-term Liabilities 3,003 2,118 1,587 2,541 2,505 Minorities 15 (11) (19) (21) (23) Long-term Debts 2,188 1,287 764 1,684 1,666 Extraordinary items - - - - - Ot hers 816 831 823 856 839 Net Profit 1,086 1,171 1,188 1,313 1,490 Shareholders' Equity 6,387 6,648 6,718 7,017 7,352 EPS ( Bt ) 1.22 1.31 1.33 1.45 1.65 Common Stock 890 893 895 905 905 Capital Surplus 3,968 4,015 4,053 4,083 4,083 Source: KGI Research Retained Earnings 1,111 1,295 1,412 1,638 1,951 Ot hers 418 445 359 390 413 Cash Flow Source: KGI Research Year to 31 Dec (Bt mn) 2014A 2015A 2016A 2017F 2018F Operating Cash Flow 2,240 2,365 2,127 2,623 2,864 Key Ratios Net Profit 1,342 1,482 1,444 1,668 1,891 Depreciation & Amortization 1,245 1,226 1,214 1,163 1,296 Year to 31 Dec (Bt mn) 2014A 2015A 2016A 2017F 2018F Forecast Drivers Change in Working Capital (417) (58) (193) 69 (30) Number of guest (mn) 30.6 28.5 29.7 32.1 33.7 Ot hers 70 (285) (337) (277) (293) Growth (% YoY) Investment Cash Flow (883) (1,480) (1,239) (1,166) (1,069) Sa l es 11.8 (0.5) 1.9 10.0 9.5 Net CAPEX (602) (1,434) (1,258) (1,100) (1,000) OP 17.8 (6.4) (25.8) 59.3 17.5 Change in LT Investment 1 1 18 - - EBI TDA 17.6 (2.4) (12.3) 20.1 14.5 Change in Other Assets (282) (46) 1 (66) (69) NP 3.3 7.8 1.5 10.5 13.4 EPS 3.0 7.5 1.2 9.2 13.4 Free Cash Flow 1,357 886 888 1,457 1,795 Profitability (%) Financing Cash Flow (1,067) (841) (476) (1,255) (1,066) Gross Margin 36.5 35.3 36.2 39.8 40.7 Change in Share Capital 61 - - 11 - Operating Margin 12.6 11.8 8.6 12.5 13.4 Net Change in Debt (277) 103 566 (209) 111 EBITDA Margin 26.6 26.1 22.5 24.6 25.7 Change in Other LT Liab. (850) (944) (1,042) (1,057) (1,177) Net Profit Margin 12.6 13.6 13.6 13.6 14.1 Net Cash Flow 290 45 412 201 729 ROAA 7.9 8.3 8.2 8.8 9.6 ROAE 17.4 18.0 17.8 19.1 20.7 Source: KGI Research Stability Gross Debt/Equity (%) 0.0 0.0 0.0 0.0 0.0 Net Debt/Equity (%) 62.0 65.3 70.1 62.9 53.5 Int erest Coverage (x) 6.3 6.6 5.2 7.3 8.2 Rates of Return on Invested Capital Int erest & ST Debt Coverage (x) 0.4 0.3 0.2 0.3 0.4 COGS Depreciation Operating Exp. Operating Year 1- + + = Cash Flow Interest Coverage (x) (13.0) (15.3) (14.8) (15.9) (16.7) Revenue Revenue Revenue Margin Cash Flow/Interest & ST Debt (x) 1.0 0.7 0.5 0.8 0.9 Dec-14A 63.5% 14.0% 23.9% -1.5% Current Ratio (x) 0.5 0.4 0.4 0.5 0.6 Dec-15A 64.7% 14.3% 23.5% -2.5% Quick Ratio (x) 0.5 0.3 0.4 0.4 0.6 Dec-16A 63.8% 13.9% 27.6% -5.3% Net Debt (Bt mn) 3,961 4,341 4,708 4,411 3,930 Dec-17F 60.2% 12.1% 27.3% -2.5% Per Share Data (Bt) Dec-18F 59.3% 12.3% 27.3% 0.4% EPS 1.2 1.3 1.3 1.5 1.6 Working Capital Net PPE Ot he r Asse t s Capital CFPS 2.5 2.7 2.4 2.9 3.2 Year 1/ + + = Revenue Revenue Revenue Turnover BVPS 7.2 7.4 7.5 7.7 8.1 Dec-14A -0.05 0.78 0.20 1.07 SPS 9.7 9.6 9.8 10.6 11.6 Dec-15A -0.01 0.86 0.19 0.96 EBITDA/Share 2.6 2.5 2.2 2.6 3.0 Dec-16A -0.02 0.87 0.19 0.96 DPS 1.1 1.2 1.2 1.3 1.4 Dec-17F 0.01 0.80 0.18 1.01 Activity Dec-18F 0.00 0.71 0.17 1.13 Asset Turnover (x) 0.6 0.6 0.6 0.6 0.7 Operating Capital Ca sh After-tax Return Year x x = Days Recei vabl es 52.2 52.9 50.9 48.5 49.9 Margin Turnover Tax Rate on Inv. Capital Days Inventory 11.0 11.1 9.2 7.6 10.4 Dec-14A -1.5% 1.1 120.2 -1.9 Days Payable (210.8) (229.5) (211.6) (175.8) (180.6) Dec-15A -2.5% 1.0 120.3 -2.8 Cash Cycl e 273.9 293.5 271.6 231.9 240.9 Dec-16A -5.3% 1.0 116.4 -5.9 Dec-17F 0.4% 1.0 100.0 0.4 Source: KGI Research Dec-18F 1.1% 1.1 74.6 0.9
Source: KGI Research
*The Company may be issuer of Derivative Warrants on these securities. 12 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT
Thailand Major Cineplex Group
Major Cineplex Group Plc – Recommendation & target price history
38 Date Rat i ng Target Price
36
34
32
30
28
26
24 Mar-16 Apr-16 May-16 Jun- 16 Jul - 16 Aug-16 Sep - 1 6 Oct - 16 Nov-16 Dec-16 Jan- 17 Feb- 17 Mar-17 Share price Target price lowered Target price raised
Source: KGI Research
KGI Locations China Shanghai Room 1907-1909， Tower A, No. 100 Zunyi Road,
Shanghai, PRC 200051
Shenzhen Room 24D1, 24/F, A Unit, Zhen Ye Building,2014 Bao’annan Road, Shenzhen, PRC 518008
Taiwan Taipei 700 Mingshui Road, Taipei, Taiwan
Telephone886.2.2181.8888 ‧ Facsimile886.2.8501.1691
Hong Kong 41/F Central Plaza, 18 Harbour Road, Wanchai, Hong Kong Telephone 852.2878.6888 Facsimile 852.2878.6800
Thailand Bangkok 8th - 11th floors, AsiaCentreBuilding
173 South Sathorn Road, Bangkok10120, Thailand
Telephone 66.2658.8888 Facsimile 66.2658.8014
KGI's Ratings Rating Definition
Outperform (OP) The stock's excess return* over the next twelve months is ranked in the top 40% of KGI's coverage universe in the related market (e.g. Taiwan).
Neutral (N) The stock's excess return* over the next twelve months is ranked in the range between the top 40% and the bottom 40% of KGI's coverage universe in the related market (e.g. Taiwan).1.3
Under perform (U) The stock's excess return* over the next twelve months is ranked in the bottom 40% of KGI's coverage universe in the related market (e.g. Taiwan).
Not Rated (NR) The stock is not rated by KGI Securities.
Restricted (R) KGI policy and/or applicable law regulations preclude certain types of communications, including an investment recommendation, during the course of KGI's engagement in an investment banking transaction and in certain other circumstances.
Excess return = 12M target price/current price-
Note When an analyst publishes a new report on a covered stock, we rank the stock's excess return with those of other stocks in KGI's coverage universe in the related market. We will assign a rating based on its ranking. If an analyst does not publish a new report on a covered stock, its rating will not be changed automatically.
Disclaimer KGI Securities (Thailand) Plc. (“The Company”) disclaims all warranties with regards to all information contained herein. In no event shall the Company be liable for any direct, indirect or any damages whatsoever resulting from loss of income or profits, arising by utilization and reliance on the information herein. All information hereunder does not constitute a solicitation to buy or sell any securities but constitutes our sole judgment as of this date and are subject to change without notice.
*The Company may be issuer of Derivative Warrants on these securities. 13 March 29, 2017 http://research.kgi.com; Bloomberg: KGIT