Credit Suisse has given an “Outperform” rating on Major Cineplex Group Public Company Limited (MAJOR) with a target price at ฿25.00/share, seeing limited risk from streaming platform in post-pandemic era.
Credit Suisse stated that the risk of MAJOR being impacted by streaming platforms is limited. Last month, Warner Bros. announced to release all of its 2021 movies in theatres and on streaming platforms simultaneously, thus, raising concerns that other producers will join the move that would lower theatres’ revenue. However, that might not be the case as several major studios, including Sony, Universal Picture, Disney and Paramount, announced delays last week to the release schedules of their movies, which Credit Suisse believed it showed major studios would want to retain cinema releases as the first window and expected Warner Bros. to revert to its original release pattern once the pandemic ends.
More importantly, Credit Suisse stated that a simultaneous release may help only boost subscribers temporarily. Citing Antenna research, Disney’s Hamilton and Soul, released last year, did help boost subscribers for Disney Plus during two weeks leading to the release dates, while Wonder Woman 1984 pumped the number of subscribers for HBO by 4.3x. However, according to the research, about a quarter of subscribers who registered for Disney Plus during Hamilton cancelled within 30 days and about 50% stopped after three months.
The numbers might be the reasons why Disney joined other producers in postponing the release date instead of going along with Warner Bros, especially for movies that are expected to perform well in cinemas such as Black Widow, The Eternals and the King’s man.
According to MAJOR, 4Q20 ticket sales revenue had surpassed 3Q20, beating Credit Suisse’s expectation that it would generate only half, which led to a revised down of loss estimate for FY20 from 1.07 billion baht previously to 891 million baht.
In addition, Credit Suisse believed the earnings outlook for MAJOR to remain intact over FY21-22, which should be dominated by a lot of interesting movies from Hollywood and Thai. However, FY21 profit forecast was cut by 9% to reflect the delay of releasing movies, but still maintained FY22 profit forecast. Credit Suisse added that a strong balance sheet and attractive dividend yield prospect over the long term are other attractions for MAJOR.
Lastly, Credit Suisse stated that the new wave of coronavirus and slower-than-expected vaccine rollout are key risk factors to its revenue forecast in 2021.