1QFY16 net profit up 13.8% y‐y on higher revenue and gain on investment

　　MAJOR’s 1QFY16 net profit grew 13.8% y‐y to Bt226mn on higher revenue and gain oninvestment. Revenue from sales and services increased 10.7% y‐y to Bt1,936mn as a greaternumber of box office movies and stronger revenue from food & beverage and ad revenueoffset losses on bowling/karaoke, rental income and MPIC. Other income shot up 15.8% asMAJOR recorded a Bt65mn gain on investment vs Bt43mn a year ago. Total cost rose 10.5%on higher cost of cinemas and food & beverage which were in tandem with revenue andscreen count. SG&A expense increased 15.7% along with higher screens, and profitcontribution from associates grew 10.7%.

　　In the first quarter, MAJOR registered three box office movies‐‐Deadpool, Gods of Egypt andBatman V Superman: Dawn of Justice—that generated more than Bt100mn each while therewas only one box office movie at Bt76mn a year earlier. An addition of 90 screens from1QFY15 to 610 in 1QFY16 drove admissions up 13% y‐y to 6.3mn and average cinema ticketprice up 3% to Bt164. Ticket sales increased 20.9% while food & beverage revenue jumped23.9% and ad revenue grew 15.3%. By contrast, bowling/karaoke revenue edged down 2.2%while rental income fell 10.6% and MPIC down 58.1%.

　　2QFY16 net profit to top high base in 2QFY15 on multiple blockbuster moviesWe expect 2QFY16 net profit to beat strong profit of Bt491mn MAJOR reported in 2QFY15as the company has enjoyed box office movies thus far‐‐Captain America: Civil War(Bt450mn) and Thai film Luang Pee Jazz 4G (Bt380mn). As the Thai film was produced byMPIC, we expect MAJOR’s gross margin to improve in the period. More important is therewill have soon‐to‐be‐released movies e.g., X‐Men: Apocalypse (generating more thanBt120mn currently), Warcraft (May 26), Independence Day 2 Resurgence, Angry Birds,Teenage Mutant Ninja Turtles 2, Finding Dory, etc. MPIC will also release three movies in thesecond quarter.

　　Lining‐up new releases to be aired in 2HFY16 are Hollywood blockbusters: Suicide Squad,Doctor Strange, The Legend of Tarzan, The Inferno, Fantastic Beasts and Where to FindThem, Rogue One: A Star Wars Story, Jumanji, Ghostbusters; and 11 Thai films—MPIC (eightmovies), GDH555 (two), T Moment (one).

　　As for screen count, MAJOR has planned to add 24 screens in 2QFY16, including nine screensthat were opened in early quarter, and 62 in the second half of the year—most of whichwould be in the fourth quarter and in the upcountry to support growing Thai film industryand MPIC movie production.

　　FY16 earnings projection unchanged, rating maintained at ‘NEUTRAL’ with Bt31.50 targetprice

　　We keep our sales and services revenue and net profit forecast unchanged at Bt9,589mnand Bt1,409mn, respectively. Our target price is Bt31.50, pegged to historical average 20xP/E. At current share price, we reiterate a ‘NEUTRAL’ rating on MAJOR.