major cineplex (major tb) (maintained) - rhb … important tmdisclosures at the end of this report...

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Company Update, 23 February 2015

Major Cineplex (MAJOR TB) Buy (Maintained) Communications - Media Target Price: THB34.40

Market Cap: USD813m Price: THB29.80

2015 Still Looks Promising Macro

1.00

Risks

2.00

Growth

2.00

Value

2.00

82

90

98

105

113

121

129

136

144

152

15.0

17.0

19.0

21.0

23.0

25.0

27.0

29.0

31.0

33.0

Major Cineplex (MAJOR TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

2

4

6

8

10

12

14

Feb

-14

Apr-

14

Jun-1

4

Aug-1

4

Oct-

14

De

c-1

4

Vol m

Source: Bloomberg

Avg Turnover (THB/USD) 42.6m/1.30m

Cons. Upside (%) 6.7

Upside (%) 15.4

52-wk Price low/high (THB) 17.0 - 30.5

Free float (%) 46

Share outstanding (m) 890

Shareholders (%)

Vicha Poolvaraluck 36.1

State Street Bank and Trust 9.0

Thai NVDR 8.2

Share Performance (%)

YTD 1m 3m 6m 12m

Absolute 7.2 7.2 15.5 38.4 65.3

Relative 0.2 2.8 13.9 34.5 43.9

Shariah compliant

Wanida Geisler +66 2862 9748

[email protected]

Naruedom Mujjalinkool

Research Associate

Forecasts and Valuations Dec-12 Dec-13 Dec-14 Dec-15F Dec-16F

Total turnover (THBm) 6,963 7,713 8,623 9,765 11,148

Reported net profit (THBm) 846 1,052 1,086 1,303 1,489

Recurring net profit (THBm) 682 1,052 1,011 1,303 1,489

Recurring net profit growth (%) (12.0) 54.2 (3.8) 28.9 14.3

Recurring EPS (THB) 0.77 1.18 1.14 1.46 1.67

DPS (THB) 0.87 0.99 1.04 1.24 1.42

Recurring P/E (x) 38.6 25.1 26.1 20.3 17.8

P/B (x) 4.50 4.33 4.18 3.99 3.82

P/CF (x) 14.6 11.9 12.0 12.5 11.3

Dividend Yield (%) 2.9 3.3 3.5 4.2 4.8

EV/EBITDA (x) 12.2 8.2 7.1 6.3 5.6

Return on average equity (%) 14.4 17.6 17.5 20.1 21.9

Net debt to equity (%) 39.8 70.5 62.0 67.0 68.6

Our vs consensus EPS (adjusted) (%) (0.4) (0.4)

Source: Company data, RHB

Despite the weak economic outlook last year, Major Cineplex posted revenue/EBIT rises of 12%/15% as all its businesses registered decent growth. Maintain BUY with a new TP of THB34.40 (from THB27.00, 15% upside). A better operating environment, a good number of potential box office hits and 80-100 new screens will be its main growth catalysts this year. In addition, its valuations are still below the sector average.

Healthy 2014. 4Q14 results were unexciting with a decline in revenue

and earnings of 1% and 30% QoQ. For the full year, total revenue grew 12% YoY to THB8.6bn, with an improved gross margin to 36.5% from 35% in 2013. Every business registered decent growth but ticket sales and concession were the star performers, posting revenue growth of 9% YoY and 11% YoY respectively (Figure 20). Also, it gained THB110m from the sale of movie rights. EBIT grew 15% YoY but bottomline increased only 3% YoY to THB1,086m (5% above our target of THB1,036m), given the much lower divestment gains of THB102m in 2014 (2013: THB209m).

2015 should be even better than 2014. This year, we expect Major

Cineplex to continue growing at 13%, 17%, and 28.6% YoY in terms of revenue, gross profit and net profit respectively. We believe the cinema business will shine with ticket sales growth of 17% YoY and concession (F&B) sales growth of 19% YoY. Potential box office hits for 1H15 include The Avengers 2, King Naresuan 6 and Jurassic World. Good cost control should also lead to an increase in gross margin to 37.8% (from 36.5%) and net margin to 13.3% (from 12.6%). Other businesses like retail rental, cinema media and advertising are expected to post a double-digit growth. Meanwhile, M Pictures Entertainment (MPIC) (MPIC TB, NR), the company’s subsidiary, expects to reduce its continued losses. We raise MPIC’s 2015 revenue and earnings by 6% and 16% respectively to factor in better prospects and improved margins.

Maintain BUY with a TP of THB34.40 (from THB27.00). The new SOP-

based TP comprises: i) THB32.12 from its core business pegged to FY15F P/E of 22x (+0.5SD), and ii) THB2.28 from potential gains on its investment portfolio. We note that Major Cineplex is trading below the media’s sector average in terms of P/E and EV/EBITDA while its annual dividend yield is also decent at 4-5%.

Major Cineplex (MAJOR TB)

23 February 2015

See important disclosures at the end of this report 2

Valuation And Recommendation Raise earnings estimates. We raise our FY15 revenue and earnings estimates by

6% and 16% respectively to factor in better prospects and improved margins. We expect Major Cineplex to continue growing at 13%, 17%, and 28.6% YoY in terms of revenue, gross profit and net profit respectively. Next year, we estimate a modest 14% growth for revenue and earnings.

Maintain BUY with a new TP of THB34.40. We increase our FY15 TP to THB34.40

(from THB27.00) to reflect better earnings prospects. We forecast FY15 EPS to grow to THB1.46 (up from THB1.26, our previous forecast). The new TP comprises: i) THB32.12 from its core business pegged to a FY15F P/E of 22x (+0.5SD), and ii) THB2.28 from potential gains on its investment portfolio.

Figure 1: Major Cineplex’s P/E band Figure 2: Major Cineplex’s investment portfolio

THBm 2014

Available for sale investment Book value 785

Investment in associates Book value 2,344

Major investment: Holding % Mkt. cap

Siam Future (NR) 24.43 3,021

Major cineplex lifestyle leasehold property fund (NR) 33.00 1,361

PVRL 5.58 774

Total

5,156

Potential gains

2,027

Per share

2.28

Source: Bloomberg Source: Company data

Figure 3: Peer comparison

Media P/E P/BV EV/EBITDA Div yield (%)

Company 15F 16F 15F 16F 15F 16F 15F 16F

MAJOR CINEPLEX GROUP 20.95 17.88 4.09 3.89 12.02 10.25 4.10 4.73

BEC WORLD 20.99 18.85 10.99 10.35 11.35 10.42 4.33 4.87

RS 34.93 22.69 10.66 8.92 19.21 12.35 2.28 3.30

WORKPOINT ENTERTAINMENT 74.04 58.41 7.27 5.90 30.78 29.18 0.82 1.17

VGI GLOBAL MEDIA 36.89 30.79 19.12 16.60 26.81 22.35 2.45 2.86

Average 37.56 29.72 10.43 9.13 20.04 16.91 2.79 3.39

Average (excluding Major Cineplex) 41.71 32.68 12.01 10.44 22.04 18.57 2.47 3.05

Consumer P/E P/BV EV/EBITDA Div yield (%)

Company 15F 16F 15F 16F 15F 16F 15F 16F

MAJOR CINEPLEX GROUP 20.95 17.88 4.09 3.89 12.02 10.25 4.10 4.73

CP ALL 26.37 20.68 9.18 7.39 16.50 14.14 2.43 2.92

HOME PRODUCT CENTER 26.54 22.22 5.75 4.91 14.73 12.60 1.94 1.83

BIG C SUPERCENTER 23.59 20.99 4.07 3.61 13.74 12.53 1.30 1.72

ROBINSON DEPARTMENT STORE 21.11 17.35 3.57 3.20 10.65 8.84 2.24 2.84

Average 23.71 19.83 5.33 4.60 13.53 11.67 2.40 2.81

Average (excluding Major Cineplex) 24.40 20.31 5.64 4.77 13.91 12.03 1.98 2.33

Source: Bloomberg, RHB


23 February 2015


2015 Outlook Potential box office hits in 2015. We expect cinema revenue to grow 17% YoY, as many blockbusters and sequels are expected to hit the screen, like The Avengers 2 (The Avengers was Thailand’s top box office hit for 2012), Fast & Furious 7 and King Naresuan 6. These could stimulate demand from moviegoers.

Figure 4: Blockbusters expected for 1Q and 2Q15 Figure 5: Box office hits

Source: Company Source: Company data

Rising average ticket price (ATP). Over the past few years, Major Cineplex has

managed to increase its ATP to THB151.00 in 2014 from THB143.00 in 2011 (3-year CAGR of 2%). Also, guest count has increased to 30.6m in 2014 from 24.9m in 2011 (3-year CAGR of 7%).

Figure 6: Concession (F&B) Figure 7: Concession income to admission revenue

Source: Company data Source: Company data

High-margin concession income stands at almost 30%. Its concession (F&B)

income averaged a gross margin of around 70% (Figure 11) and has been on the uptrend. Concession income, as a proportion of admission income, increased to 30% in 2014 from only 22% in 2008. The ratio usually swings quarter by quarter depending on revenue from box office hits. However, since there are more potential box office hits in 2015, concession income is likely to grow at a double-digit rate of 19%.


23 February 2015


Expansion of new cinema screens. Over the past three years, new cinema screens

have grown by an average of 10.6% to 520 in 2014 from 383 in 2011. The screen ratio between Bangkok and its vicinity and the provincial areas is now 70:30, rising to 60:40 by end-2015 and 55:45 by 2020. Revenue contribution between Bangkok and its vicinity, on the other hand, is around 65:35.

This year, the company plans to add 80-100 new cinema screens (see Figure 9), higher than its 3-year average. This is due to its plan to add more small-scale cinemas in big districts upcountry, which will be attached to Tesco Lotus stores and Big C Supercenter stores. High potential new locations in Bangkok are Emquartier (Sukumvit 39), Central West Gate (Bangyai) and Central East Ville (Ekamai-RamIndra), which are located in some of the best malls. The company sets aside a capex of THB1bn-1.2bn this year, up from about THB870m last year. With a net debt to equity ratio of 0.62x, Major Cineplex is in a good position to continue with its expansion plan.

Figure 8: Number of screens Figure 9: Screen expansion in 2015


Effective cost reduction programme. Major Cineplex succeeded in switching the

ticket sales format from the traditional box office (which requires human labour) to automatic ticket machine, including mobile application and online ticketing strategies. At the beginning of 2014, the ratio between E-ticket payments and box office payments was 60:40, but now, it constitutes about 85:15 of admission revenue. Its cinema GPM, which improved by 20% in 2014, is a testament to the company’s excellent management skills.

Figure 10: Major Cineplex’s admission income and gross margins

Figure 11: Major Cineplex’s concession income and gross margins



23 February 2015


Resilient rental business. After WE Fitness occupied the space previously rented

by loss-ridden California WOW Fitness Center, the gross margin for this business picked up to 21% in 2014 vs 17% in 2013, together with the occupancy rate, which increased to 90% (from 80%). We expect revenue from the rental business to grow slightly by 6% this year, as it will have a few more rental spaces from new branches to be opened in 2015 (see Figure 12).

Figure 12: Major Cineplex’s rental income Figure 13: Major Cineplex’s occupancy rate


Major Cineplex saw a growth in its ad income last year despite weak overall adex. Delay in government expenditures, coupled with weak consumer confidence

amid an economic slowdown led to a decline in total advertising expenditure and cinema media by 9.5% and 18.9% YoY respectively. However, Major Cineplex, the market leader, could still grow its cinema media income by 6% YoY.

We expect the total advertising expenditure to rebound about 7-10% this year as the economic conditions are set to recover from last year’s low base. With more potential box office hits this year and a new high-end cinema branch at Emquartier (Sukumvit 39) which could draw more sponsorship contracts, we estimate its ad revenue to increase 13% YoY.

Figure 14: Major Cineplex’s advertising income Figure 15: Thailand’s total adex

2013 2014 % change

TV 69,249 63,776 -7.9%

Radio 6,320 5,625 -11.0%

Newspapers 15,256 13,166 -13.7%

Magazines 5,674 4,721 -16.8%

Cinema 5,368 4,351 -18.9%

Outdoor 4,167 3,990 -4.2%

Transit 3,530 3,806 7.8%

In store 2,655 1,953 -26.4%

Internet 877 950 8.3%

Total 113,096 102,346 -9.5%

Source: Company data Source: Nielsen


23 February 2015


More bowling business overseas. Although its GPM on its bowling business was

maintained in the 36-37% range during 2013-2014, Major Cineplex has gradually closed loss-making bowling alleys over the past few years. The company now has bowling business in India and Cambodia and plans to close bowling alleys at two more branches in Thailand this year.

Additional 10-12 Thai movies via MPIC in 2015. Because 30-40% of Major

Cineplex’s cinemas are now in the upcountry where moviegoers are fond of local movies rather than Hollywood or foreign movies, it sees big opportunity in this area.

MPIC plans to produce 10-12 Thai movies this year (2014: four movies). In order

to minimise cost and reduce risks, the company limits the production cost of each movie to around THB30m (lower than management’s last target of THB40m) and finds sponsors to finance the remaining THB5m-10m production cost. If it is unable to find enough sponsors, the production will not take place. This strategy has helped the company to minimise the risk of losing money from producing Thai movies in 2014.

MPIC’s performance is gradually recovering. MPIC had incurred losses over the

past few years, losing THB315m in 2012, THB246m in 2013 and THB183m in 2014. It seems that its losses have reduced by 22% in 2013 and 26% in 2014. This has shown the effectiveness of its business model restructuring, where it shifts its focus from being a manufacturer and distributor of DVDs/VCDs to selling/distributing movie rights to other parties such as DVD/VCD firms, movie companies, digital TV operators and cable/satellite TV operators. We expect MPIC to continue to reduce its loss this year as the company is trying hard to reduce the risk of loss in producing Thai movies.

Investment in India. Currently, PVR Cinemas India (Major Cineplex holds 5.58% of

PVR cinemas) has 462 screens (end-2013: 360 screens) in 104 locations and will likely reach 500 screens by 2015. Moreover, there is also a joint-venture (JV) (49% of Major Cineplex’s holdings) with PVR bluO, which consists of 110 bowling lanes in five locations.

Investment in Cambodia. Major started investing in Cambodia – its first cineplex

beyond Thailand – at the beginning of 3Q14, with seven cinema screens and 14 bowling lanes in Aeon Mall Phnom Penh. Currently, this investment is able to generate about THB7m quarterly profit for the company. The amount of profit generated by the company and its breakeven time have exceeded management’s expectation.

Maintain its investment in overseas businesses. Management projects to

maintain its investment in other countries, as all its overseas businesses have proven to be profitable. While focusing on expanding the screens in the domestic country, the company still considers the possibility of expanding in the Cambodia, Laos, Myanmar and Vietnam (CLMV) district, which can happen in the next 1-3 years.

Bowling business consists of bowling, ice skating and karaoke businesses

Figure 16: MPIC’s revenue and net profit

Source: Company Data

PVR cinemas is now India’s largest multiplex chain


23 February 2015


Earnings Estimates A shining 2015. We strongly believe that this year will be another bright year for

Major Cineplex. We expect its total revenue to rise 13% YoY, driven by ticket sales growth of 17%, concession sales growth of 19% and cinema media income growth of 13%. Meanwhile, bowling and rental business should maintain a stable growth of 5% and 6% respectively. However, its movie distribution may decline 10% due to the one-time gain from the sale of movie rights to MONO Entertainment (MONO TB, NR) in 2014, which contributed revenue of THB110m. We note that there are many potential box office hits throughout 2015. Moreover, introducing 50-60 new screens would also help multiply cinema revenue (in terms of ticket sales and concession income), cinema media income and rental income, as it has more screens to advertise and also more rental space.

We forecast total revenue of THB9,765m, higher than our last forecast of THB9,212m. This is because the company was able to maintain its growth potential during 2014 despite Thailand’s overall economic growth seemingly slowing down, as evident by GDP growth of only 0.7% last year. We also expect Major Cineplex’s GPM to increase to 37.8% this year from 36.5%, after the cost control method fully takes place this year. This will be reflected in net profit improving to THB1,303m (2014: THB1,086m), showing a 20% and 28.6% growth in net profit and recurring net profit respectively.

Figure 17: Major Cineplex’s revenue breakdown Figure 18: Major Cineplex’s revenue and net profit



Key Risks Economic conditions. Major Cineplex’s business is highly dependent on private

spending, consumer confidence and GDP growth. Since economic numbers last year were sluggish amid political turmoil, we expect things to rebound this year even though the recovery pace remains slow for the time being. Management is still worried about domestic consumption, which may recover slower than expected. It hopes that Thailand’s economy would start recovering in 1Q15, but currently, it is not able to find any signs of recovery from domestic consumption yet.

Movie line-ups. Since its main business relates to cinema, movie line-ups are

crucial. Although the line-up this year appears to be strong, we need to see a recovery in domestic consumption in order to achieve our 13% revenue growth target for 2015.


23 February 2015


4Q14 And 2014 Wrap-Up

Figure 19: Major Cineplex’s quarterly performance Figure 20: Major Cineplex’s revenue and GPM

THBm 2013 GPM 2014 GPM Revenue

YoY%

Admissions 4,090 19% 4,475 20% 9%

Concession sales 1,175 69% 1,310 70% 11%

Bowling 428 37% 481 36% 12%

Rental fee 482 17% 520 21% 8%

Advertisements 1,077 86% 1,127 86% 5% Sales of movie rights 460 -14% 710 10% 54%

Total Revenue 7,712 35% 8,623 37% 12%


Figure 21: Major Cineplex’s 4Q14 and 2014 results review

FYE Dec (THBm) 4Q13 3Q14 4Q14 QoQ (%)

YoY (%)

2013 2014 YoY (%)

Comments

Admissions 926 1,070 1,125 5 22 4,090 4,475 9

Concession sales 267 324 319 (2) 19 1,175 1,310 11

Bowling 130 127 130 2 (0) 428 481 12

Rental fee 120 127 136 7 13 482 520 8

Advertisements 276 349 274 (21) (1) 1,077 1,127 5

Sales of movie rights

76 156 139 (11) 83 460 710 54 THB110m in gains from the sale of movie rights to MONO in 2Q14

Revenue 1,795 2,153 2,124 (1) 18 7,712 8,623 12

EBITDA 466 578 503 (13) 8 2,166 2,425 12

EBITDA Margin (%) 26 27 24 28 28

Depreciation (318) (280) (311) 11 (2) 2,166 2,425 12

EBIT 148 297 192 (35) 30 1,053 1,214 15

EBIT Margin (%) 8 14 9 14 14

Interest expense (46) (41) (43) 6 (5) (148) (173) 17

Interest income 0 0 0 - - 0 0 -

Associates 39 52 62 19 58 188 199 6

EI/Others (13) 63 39 - - 209 102 (51) Sold stake in Siam Future Development (SF TB, NR) and PVR

Pretax profit 128 371 250 (33) 95 1,302 1,342 3

Pretax Margin (%) 7 17 12 17 16

Tax (23) (81) (52) (36) 125 (277) (271) (2)

Effective tax rate (%)

(18) (22) (21) (21) (20)

Minority Interest 5 3 9 168 75 27 15 (44)

Net Profit 110 293 207 (30) 88 1,052 1,086 3 5% above our forecast of THB1,036m

Core Profit 123 230 168 (27) 36 843 984 17 Decent core profit growth

Net Margin (%) 7 11 8 11 11



23 February 2015


Financial Exhibits

Profit & Loss (THBm) Dec-12 Dec-13 Dec-14 Dec-15F Dec-16F

Total turnover 6,963 7,713 8,623 9,765 11,148

Cost of sales (4,715) (5,011) (5,475) (6,073) (6,925)

Gross profit 2,248 2,702 3,148 3,692 4,223

Other operating costs (1,665) (1,781) (2,064) (2,353) (2,698)

Operating profit 583 921 1,084 1,339 1,525

Operating EBITDA 1,666 1,986 2,294 2,547 2,823

Depreciation of fixed assets (1,083) (1,065) (1,210) (1,208) (1,298)

Operating EBIT 583 921 1,084 1,339 1,525

Net income from investments 175 189 199 210 235

Other recurring income 213 340 138 170 180

Interest expense (133) (149) (173) (165) (165)

Other non-recurring income 219 - 94 - -

Pre-tax profit 1,057 1,301 1,342 1,554 1,775

Taxation (266) (276) (271) (269) (308)

Minority interests 55 27 15 18 22

Profit after tax & minorities 846 1,052 1,086 1,303 1,489

Reported net profit 846 1,052 1,086 1,303 1,489

Recurring net profit 682 1,052 1,011 1,303 1,489


Cash flow (THBm) Dec-12 Dec-13 Dec-14 Dec-15F Dec-16F

Operating profit 583 921 1,084 1,339 1,525

Depreciation & amortisation 1,083 1,065 1,210 1,208 1,298

Change in working capital (106) (580) 180 (204) (203)

Other operating cash flow 645 1,241 175 211 197

Operating cash flow 2,205 2,647 2,649 2,553 2,817

Interest paid (133) (149) (173) (165) (165)

Tax paid (266) (276) (271) (269) (308)

Cash flow from operations 1,806 2,222 2,205 2,120 2,343

Capex (804) (1,866) (725) (995) (800)

Other new investments 27 (1,360) (133) (275) (297)

Other investing cash flow (243) (153) (144) (410) (412)

Cash flow from investing activities (1,020) (3,379) (1,002) (1,680) (1,510)

Dividends paid (689) (870) (904) (1,015) (1,187)

Proceeds from issue of shares 86 (1) 51 - -

Increase in debt (133) 1,942 (256) 462 -

Other financing cash flow (80) 101 (11) 90 30

Cash flow from financing activities (816) 1,172 (1,122) (464) (1,157)

Cash at beginning of period 511 481 496 577 555

Total cash generated (30) 15 81 (25) (323)

Implied cash at end of period 481 496 577 552 232



23 February 2015


Financial Exhibits

Balance Sheet (THBm) Dec-12 Dec-13 Dec-14 Dec-15F Dec-16F

Total cash and equivalents 481 496 577 555 237

Inventories 132 175 154 170 187

Accounts receivable 1,454 1,159 1,307 1,438 1,581

Other current assets 236 307 343 377 453

Total current assets 2,303 2,137 2,382 2,540 2,458

Total investments 1,950 3,310 3,443 3,718 4,016

Tangible fixed assets 5,332 6,696 6,730 6,990 7,039

Total other assets 1,745 1,487 1,377 1,500 1,600

Total non-current assets 9,027 11,493 11,551 12,208 12,655

Total assets 11,330 13,629 13,932 14,748 15,113

Short-term debt 1,683 2,443 2,351 2,500 2,500

Accounts payable 1,527 1,736 1,899 1,899 1,899

Other current liabilities 264 172 292 322 354

Total current liabilities 3,474 4,352 4,542 4,721 4,753

Total long-term debt 1,170 2,352 2,188 2,500 2,500

Other liabilities 726 827 816 890 920

Total non-current liabilities 1,896 3,179 3,003 3,390 3,420

Total liabilities 5,370 7,530 7,546 8,111 8,173

Share capital 888 888 890 890 890

Retained earnings reserve 729 913 1,111 1,399 1,701

Other reserves 4,256 4,302 4,329 4,344 4,344

Shareholders' equity 5,873 6,103 6,331 6,633 6,936

Minority interests 87 (4) 56 3 4

Other equity - (0) 0 0 0

Total equity 5,960 6,099 6,387 6,637 6,940

Total liabilities & equity 11,330 13,629 13,932 14,748 15,113


Key Ratios (THB) Dec-12 Dec-13 Dec-14 Dec-15F Dec-16F

Revenue growth (%) 3.5 10.8 11.8 13.2 14.2

Operating profit growth (%) (27.8) 57.9 17.8 23.5 13.9

Net profit growth (%) 8.2 24.3 3.3 20.0 14.3

EPS growth (%) 7.8 23.9 3.2 19.8 14.3

Bv per share growth (%) (1.1) 4.0 3.4 4.8 4.6

Operating margin (%) 8.4 11.9 12.6 13.7 13.7

Net profit margin (%) 12.1 13.6 12.6 13.3 13.4

Return on average assets (%) 7.6 8.4 7.9 9.1 10.0

Return on average equity (%) 14.4 17.6 17.5 20.1 21.9

Net debt to equity (%) 39.8 70.5 62.0 67.0 68.6

DPS 0.87 0.99 1.04 1.24 1.42

Recurrent cash flow per share 2.04 2.50 2.48 2.38 2.63



23 February 2015


SWOT Analysis

Leader in the cinema business with 80% market share

Strong synergy with related businesses like bowling/karaoke, rental, cinema media and film distribution

Slow recovery in private spending and purchasing power

Highly dependent on movie line-ups

Room to expand in the provinces

More cinemas will likely lead to strong growth in high-margin cinema media and concession incomes

Room to improve margins

Some cannibalisation among branches

Some businesses, like bowling and film production/distribution, are not doing well

0%

4%

8%

11%

15%

19%

23%

26%

30%

0

5

10

15

20

25

30

35

40

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

P/E (x) vs EPS growth

P/E (x) (lhs) EPS growth (rhs)

0%

4%

8%

13%

17%

21%

25%

3.4

3.6

3.8

4.0

4.2

4.4

4.6

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

P/BV (x) vs ROAE

P/B (x) (lhs) Return on average equity (rhs)

Source: Company data, RHB Source: Company data, RHB

Company Profile Major Cineplex is Thailand's largest cinema operator with a market share of around 80%. It is also engaged in related businesses like bowling/karaoke, rental, cinema media and film distribution.


23 February 2015


Recommendation Chart

6.1

11.1

16.1

21.1

26.1

31.1

36.1

Feb-10 Jun-11 Sep-12 Dec-13

Price Close

na

22.0

16.0

18.5

18.8

15.3

27.0

Recommendations & Target Price

Buy Neutral Sell Trading Buy Take Profit Not Rated

Source: RHB, Bloomberg

Date RecommendationTarget Price Price

2014-11-10 Buy 27.0 24.9

2014-09-16 Buy 27.0 23.6

2014-05-12 Sell 15.3 17.5

2014-02-18 Sell 15.3 18.2

2013-09-27 Sell 18.8 19.3

2013-05-13 Sell 18.5 23.8

2013-03-07 Sell 18.5 21.1

2012-11-13 Sell 16.0 19.7

2012-08-16 Buy 22.0 17.5

Source: RHB, Bloomberg

13

RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. It is intended for circulation to the clients of RHB and its related companies. Any recommendation contained in this report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for the information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or financial advice to independently evaluate the particular investments and strategies. This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB’s strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such information and accordingly investors should make their own informed decisions before relying on the same. RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be materially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this research report. RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise from any reliance based on this report or further communication given in relation to this report, including where such losses, loss of profits or damages are alleged to have arisen due to the contents of such report or communication being perceived as defamatory in nature. The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction ment ioned specifically herein below and shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and related companies. All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect. Malaysia This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Singapore This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group) and OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”, which in turn is a wholly-owned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; this report is therefore classified as a non-independent report. As of 19 February 2015, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd do not have proprietary positions in the securities covered in this report, except for: a) - As of 19 February 2015, none of the analysts who covered the securities in this report has an interest in such securities, except for: a) - Special Distribution by RHB Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributed to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not an "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this research report in its entirety. In respect of any matters arising from, or in connection with this research report, you are to contact our Singapore Office, DMG & Partners Securities Pte Ltd Hong Kong This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (“RHBSHK”) (formerly known as OSK Securities Hong Kong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”), which in turn is a wholly-owned subsidiary of RHB Capital Berhad.

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RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company. RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company. Risk Disclosure Statements The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK does not maintain a predetermined schedule for publication of research and will not necessarily update this report Indonesia This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Thailand This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Other Jurisdictions In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and regulations of the jurisdictions. DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage DISCLAIMERS This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB” which in turn is a wholly-owned subsidiary of RHB Capital Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. This report is therefore classified as a non-independent report. As of 19 February 2015, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 19 February 2015, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) - DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)

Kuala Lumpur Hong Kong Singapore

Malaysia Research Office

RHB Research Institute Sdn Bhd Level 11, Tower One, RHB Centre

Jalan Tun Razak Kuala Lumpur

Malaysia Tel : +(60) 3 9280 2185 Fax : +(60) 3 9284 8693

RHB OSK Securities Hong Kong Ltd. (formerly known

as OSK Securities Hong Kong Ltd.)

12th Floor

World-Wide House 19 Des Voeux Road Central, Hong Kong

Tel : +(852) 2525 1118 Fax : +(852) 2810 0908

DMG & Partners

Securities Pte. Ltd. 10 Collyer Quay

#09-08 Ocean Financial Centre Singapore 049315

Tel : +(65) 6533 1818 Fax : +(65) 6532 6211

Jakarta Shanghai Phnom Penh

RHB OSK Securities Indonesia Wisma Mulia Building, 20th Floor, Jl. Jenderal Gatot Subroto No. 42,

Jakarta 12710, Indonesia Tel : +(6221) 2783 0888 Fax : +(6221) 2783 0777

RHB OSK (China) Investment Advisory Co. Ltd.

(formerly known as OSK (China) Investment Advisory Co. Ltd.)

Suite 4005, CITIC Square 1168 Nanjing West Road

Shanghai 20041 China

Tel : +(8621) 6288 9611 Fax : +(8621) 6288 9633

RHB OSK Indochina Securities Limited (formerly

known as OSK Indochina Securities Limited)

No. 1-3, Street 271 Sangkat Toeuk Thla, Khan Sen Sok

Phnom Penh Cambodia

Tel: +(855) 23 969 161 Fax: +(855) 23 969 171

Bangkok

RHB OSK Securities (Thailand) PCL (formerly known

as OSK Securities (Thailand) PCL) 10th Floor, Sathorn Square Office Tower

98, North Sathorn Road,Silom Bangrak, Bangkok 10500

Thailand Tel: +(66) 2 862 9999

Fax : +(66) 2 108 0999

Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2014

Excellent

BAFS HANA KTB SAMART SIM BCP INTUCH MINT SAMTEL SPALI BTS IRPC PSL SAT TISCO CPN IVL PTT SC TMB EGCO KBANK PTTEP SCB TOP GRAMMY KKP PTTGC SE-ED

Very Good

AAV BKI DTAC KSL NMG PS SNP TIPCO UAC ACAP BLA DTC LANNA NSI PT SPI TK VGI ADVANC BMCL EASTW LH OCC QH SSF TKT VNT ANAN BROOK EE LHBANK OFM RATCH SSI TNITY WACOAL AOT CENTEL ERW LOXLEY PAP ROBINS SSSC TNL ASIMAR CFRESH GBX LPN PE RS STA TOG ASK CIMBT GC MACO PG S&J SVI TRC ASP CK GFPT MC PHOL SAMCO TCAP TRUE BANPU CNT GUNKUL MCOT PJW SCC TF TSTE BAY CPF HEMRAJ NBC PM SINGER THAI TSTH BBL CSL HMPRO NCH PPS SIS THANI TTA BECL DELTA ICC NINE PR SITHAI THCOM TTW BIGC DRT KCE NKI PRANDA SNC TIP TVO

Good

2S AQUA CCET EA IFS MAKRO NTV PRG SIAM STPI TIC TUF AF ARIP CGD ESSO IHL MATCH NUSA PRIN SIRI SUC TICON TVD AH AS CGS FE INET MBK NWR PTG SKR SWC TIW TWFP AHC ASIA CHOW FORTH IRC MBKET NYT QLT SMG SYMC TKS UMI AIT AYUD CI FPI IRCP MEGA OGC QTC SMK SYNEX TLUXE UP AJ BEAUTY CKP GENCO ITD MFC OISHI RCL SMPC SYNTEC TMI UPF AKP BEC CM GL KBS MFEC PACE SABINA SMT TASCO TMT UPOIC AKR BFIT CMR GLOBAL KGI MJD PATO SALEE SOLAR TBSP TNDT UT AMANAH BH CSC GLOW KKC MODERN PB SCBLIF SPC TEAM TPC UV AMARIN BJC CSP GOLD KTC MONO PDI SCCC SPCG TFD TPCORP UWC AMATA BJCHI CSS HOTPOT L&E MOONG PICO SCG SPPT TFI TRT VIH AP BOL DCC HTC LRH MPG PPM SEAFCO SST THANA TRU WAVE APCO BTNC DEMCO HTECH LST MTI PPP SEAOIL STANLY THIP TSC WHA APCS BWG DNA HYDRO MAJOR NC PREB SFP STEC THREL TTCL WIN

WINNER YUASA

ZMICO

IOD (IOD Disclaimer)

การเปิดเผลผลการส ารวจของสมาคมส่งเสริมสถาบันกรรมการบรษิัทไทย (IOD) ในเรื่องการก ากับดูแลกิจการ (Corporate Governance) นี้เป็นการด าเนินการตามนโยบายของส านักงานคณะกรรมการก ากับหลักทรัพย์และตลาดหลักทรัพย์ โดยการส ารวจของ IOD เป็นการส ารวจและประเมินจากข้อมูลของบรษัทจดทะเบียนในตลาดหลักทรัพย์แห่งประเทศไทยและตลาดหลกัทรัพย์เอ็มเอไอ ที่มีการเปิดเผยต่อสาธารณะและเป็นข้อมูลที่ผูล้งทุนทั่วไปสามารถเข้าถงึได้ ดังนั้นผลส ารวจดังกล่าวจึงเป็นการน าเสนอในมุมมองของบุคคลภายนอกโดยไม่ได้เป็นการประเมินการปฏิบัติและมิได้มีการใช้ข้อมูลภายในในการประเมิน

อนึ่ง ผลการส ารวจดังกล่าว เป็นผลการส ารวจ ณ วนัที่ปรากฎในรายงานการก ากับดแูละกิจการบริษัทจดทะเบียนไทยเท่านั้น ดังนั้นผลการส ารวจจึงอาจเปลี่ยนแปลงได้ภายหลังวันดังกล่าว ทัง้นี้บริษัทหลักทรัพย์ อาร์เอสบี โอเอส เค จ ากัด (มหาชน) มิได้ยืนยันหรือรับรองถึงความถูกต้องของผลการส ารวจดงักล่าวแต่อย่างใด

major cineplex (major tb) (maintained) - rhb … important tmdisclosures at the end of this report...

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