20170227-申万宏源研究_香港_-IMAX_CHINA-01970.HK-影院建设数量增加_佳片促进业绩提升_11页_1mb

IMAX China 2017 Financial and Strategic Summary

Core Content Overview

IMAX China reported its financial results for the year 2016, which were largely in line with expectations. The company's revenue for 2016 was $118.5 million, representing a 7.2% year-over-year (YoY) increase, slightly below the forecast of $122.2 million. Adjusted net profit was $37.6 million, a 13.4% YoY decline, but higher than the forecast of $37.2 million. The company maintained a diluted EPS of $0.10, matching the forecast.

The financial performance was affected by a weaker film slate in 2016 and the rapid expansion of the cinema network, particularly revenue-sharing systems. The company also noted the impact of the 7% depreciation of the RMB against the USD on its financials.

Key Financial Highlights

• Revenue: $111 million (2015), $119 million (2016), $153 million (2017E), $178 million (2018E), $203 million (2019E)
• YoY Growth: 41.39% (2015-2016), 7.18% (2016-2017E), 29.33% (2017E-2018E), 16.16% (2018E-2019E)
• Net Income: -$182 million (2015), $36 million (2016), $57 million (2017E), $72 million (2018E), $87 million (2019E)
• YoY Net Income Change: Turn negative, Turn positive, 56.95%, 26.57%, 21.38%
• EPS: -$0.62 (2015), $0.10 (2016), $0.16 (2017E), $0.20 (2018E), $0.24 (2019E)
• Gross Margin: 65.4% (2015), 58.5% (2016), 66.19% (2017E), 69.65% (2018E), 72.40% (2019E)
• Adjusted Net Margin: 39.2% (2015), 31.7% (2016), 30.4% (2017E), 28.4% (2018E), 25.0% (2019E)
• Dividend Yield: -7.49% (2015), 45.87% (2016), 29.29% (2017E), 23.14% (2018E), 19.06% (2019E)
• P/B (Price to Book): 10.48 (2015), 8.77 (2016), 6.56 (2017E), 5.10 (2018E), 4.02 (2019E)
• EV/EBITDA: -9.76 (2015), 25.94 (2016), 16.48 (2017E), 12.78 (2018E), 10.19 (2019E)

Main Points

• 2016 Performance: Revenue and net profit were in line with forecasts, but the company faced a weaker film slate and a significant expansion of its cinema network.
• PSA Recovery: Per-screen average revenue (PSA) for 2016 was $932,000, lower than the forecast of $963,000 due to poor content and RMB depreciation. However, the company expects a recovery in 2017 with improved content and more mature installations.
• Margin Pressure: The gross margin dropped by 6.9 percentage points (ppts) and adjusted net margin by 7.5 ppts due to the rapid expansion of the cinema network, especially revenue-sharing systems. Operating margin slightly decreased from 38.3% to 37.4%.
• 2017 Outlook: The company guided for 120 installations in 2017, higher than the previous forecast of 105, indicating strong demand for IMAX systems. The backlog of 334 installations suggests continued growth.
• Film Lineup: IMAX is set to benefit from a strong lineup of overseas and domestic films in 2017, including Journey to the West and xXx: Return of Xander Cage, which had strong initial box office performance.
• Valuation: The company's target price is maintained at HK$42.5, with an 18% upside, and the rating remains "Outperform".

Key Information

• Market Cap: USD 1,659 million (2016), HK$ 12,872 million (2016)
• Closing Price (HK$): 36.1
• Price Target (HK$): 42.5
• Shares Outstanding (Mn): 356.6
• Exchange Rate (US$-HK$): 0.129
• 52-week High/Low (HK$): 52.9/31.1
• 2016 Box Office: $295.7 million, with PSA at $932,000
• 2017 EPS Forecast: Raised from $0.14 to $0.16, a 60% YoY increase
• 2018 EPS Forecast: Raised from $0.18 to $0.20, a 25% YoY increase
• 2019 EPS Forecast: $0.24, a 20% YoY increase

Investment Highlights

• Outperform Rating: Maintained with a target price of HK$42.5, indicating an 18% upside
• PSA Recovery: Expected to improve in 2017 due to better film slate and more mature installations
• Cinema Expansion: Continued expansion of the cinema network, with 120 installations expected in 2017
• Film Performance: Strong performance from Journey to the West and xXx: Return of Xander Cage in 2017
• Profitability: Improved profitability expected due to a return to 2015 levels of film slate and marketing costs

Financial Ratios

• ROE: 28.05% (2015), 16.55% (2016), 25.63% (2017E), 24.81% (2018E), 23.60% (2019E)
• Debt-to-Asset Ratio: 0% for all years
• Effective Tax Rate: -6.44% (2015), 25.00% (2016), 25.00% (2017E), 25.00% (2018E), 25.00% (2019E)
• Turnover Rate of Net Assets: 120.19% (2015), 68.34% (2016), 69.36% (2017E), 61.63% (2018E), 55.10% (2019E)
• Turnover Rate of Total Assets: 59.24% (2015), 48.67% (2016), 51.38% (2017E), 48.19% (2018E), 45.00% (2019E)

Strategic Outlook

• 2017 Film Lineup: A mix of blockbuster overseas films and strong domestic titles is expected to drive better box office performance.
• Cinema Network Growth: Continued expansion with a focus on revenue-sharing systems and a significant backlog of installations.
• Management Optimism: Management is optimistic about the 2017 film slate, especially the strong overseas titles and domestic hits like Journey to the West.
• Profitability: Expected to improve as the network matures and the film slate returns to 2015 levels.

Conclusion

IMAX China's financial performance in 2016 was impacted by weaker content and rapid network expansion. However, the company is expected to recover in 2017 with a stronger film slate and more mature installations. The investment rating remains "Outperform" with a target price of HK$42.5, indicating potential for growth and improved profitability.