20161121 IMAX China (1970 HK) 21 Nov 2016...
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TMT | NOVEMBER 21, 2016 Analyst certifications and other important disclosures on last page 1 IMAX CHINA | 1970 HK 2Q17… a new hope Disappointing 2016 box office… …but rich pipeline points to rebound in 2Q17F Await a better entry point; maintain Neutral No surprise box office ending this year. Following 34% box office growth in 2014 and 44% in 2015, we expect only 3% growth in 2016F due to the high base the previous two years, fewer ticket subsidies and a lack of blockbuster films. Expected YoY monthly box office in Oct/Nov/Dec is -19%/-10%/-5% reflecting the lackluster performance of recently debuted IMAX films. We expect a box office rebound in 2Q17F based on IMAX Corp’s ambitious 2017 film pipeline, which for now includes 24 IMAX films, among them Transformers 5, Fast 8, and Star Wars: Episode 8. Before the year is out, the list could grow to 47 new IMAX films, similar to the company’s film output in each of the previous two years. IMAX Corp exploring new business. IMAX Corp recently announced a deal with Marvel Television and ABC Television whereby IMAX will premiere the new ABC series The Inhumans based on Marvel characters. The series will play in IMAX commercial theatres globally, a first for a live-action television series debut. We expect the initiative to enhance IMAX's brand awareness and reputation for high quality, though the short-term impact to IMAX Corp and IMAX China’s financial performance is likely to be small. Maintain Neutral rating; wait for a better entry point. Given (1) China’s weak box office performance of late and (2) the high base in 1Q16 in terms of box office performance (50% YoY growth), we see little chance of a rebound in IMAX China’s fundamentals, at least in the short term. Thus, we maintain our forecasts and Neutral rating on the firm. Our unchanged target price of HK$38.80 remains based on 30x 2017F P/E. We expect 1Q17F to be a possible new entry point for the company in anticipation of a box office rebound beginning in 2Q17F. Neutral maintained Current price Target HK HK as at mid -day Nov maintained Trading data 52-week range HK$34.00 – 60.00 Market capitalization (m) HK$14,106/US$1,813 Shares outstanding (m) 355 Free float (%) 25.8 3M average daily T/O (m share) 0.5 3M average daily T/O (US$ m) 2.4 Expected 12-month return (%) -2.3 Source: Bloomberg, CCBIS Price vs HSCEI Source: Bloomberg, CCBIS Forecast and valuation Year to 31 Dec 2014 2015 2016F 2017F 2018F Revenue (US$ m) 78 111 132 153 185 YoY (%) N/A 41.3 19.5 16.0 21.0 Reported net profit (US$ m) 23 -182 44 56 70 YoY (%) N/A N/A N/A 27.3 25.0 Adjusted net profit(US$ m) 26 43 47 59 73 YoY (%) N/A 67.1 8.3 26.2 22.8 Adjusted EPS(HK$) 0.60 0.95 1.02 1.29 1.59 Adjusted P/E (x) 66.6 42.0 38.7 30.7 25.0 Dividend yield (%) 0.0 0.5 0.0 0.0 0.0 P/B (x) 69.2 11.5 8.9 6.9 5.4 ROAE (%) 154.6 -197.7 24.3 24.0 23.3 Net debt/equity (%) -183.7 -57.5 -65.9 -67.0 -67.9 Source: Bloomberg, CCBIS Stock performance Performance over 1M 3M 12M Absolute 3 -9 -19 Relative (%) to HSCEI 6 -7 -11 Source: Bloomberg, CCBIS Eric Qiu, CFA (852) 3911 8243 [email protected] Ronnie Ho (852) 3911 8259 [email protected] 0 10 20 30 40 50 60 70 Oct-15 Dec-15 Mar-16 Jun-16 Aug-16 Nov-16 HK$ IMAX China HSCEI (rebased) 8998298/21311/20161129 10:08
