Asian Blockbuster: Major Cineplex Group

In developing countries, cinema is a Veblen good. The added advantage that developing countries have is that a burgeoning middle-class are and will begin to regard the cinema as just another entertainment good in their growing portfolio of weekly leisure activities. With that context in mind, Major Cineplex Group looks to be an excellent value investment for the future.

Major Cineplex currently operates 435 cinema screens in 62 locations throughout Thailand. Included in this number is Thailand's largest cinemaplex, Siam Paragon, which boasts the country's only IMAX theatre as well as the world's most expensive cinema experiences, such as Nokia VIP cinema (THB2,000 per person) and members-only Enigma (THB4,000 per person). They expect to reach 500 screens by the end of 2013. They have also invested in upgrading their screens to become digital-based, reflecting a focus on quality and an exceptional customer experience. In Thailand, Major’s ticket sales have risen 25% this year as a result of the growing middle-class and an increase in the number of cinema screens providing easier access to cinemas to more people. Furthermore, an alliance with PTT Group to launch 100% biodegradable popcorn buckets highlights the important connections that Major have cultivated which will aid them in their local and regional expansion efforts. By the end of 2014, Major hopes to introduce 150 new screens within Thailand and surrounding countries.

Enigma Cinema, Siam Paragon

In fact, their strategy is focused on exploiting their relative expertise internationally, marking a significant transition for Major by moving from a local cinema operator into a regional and global business. They are focusing initially on Cambodia, Laos, Myanmar, Vietnam and India, with a view to taking advantage of the increased business flexibility being introduced by the ASEAN economic community in 2015. In particular, they are investing THB220 million in opening its first multiplex theatre in Cambodia with 8 cinema screens – this will be a major development for a country without a modern cinema to date. The company has also put THB200 million into developing a 100-lane bowling alley in India, a manifestation of their diversification into several entertainment activities. Major’s overseas investments should output an expected 10% of total revenue by 2015.

Bowling Alleys Asia

Major have invested heavily in bowling alleys, which is a very popular entertainment activity within Asia as it is associated with Western middle-class aspirations. Currently they own 360 lanes with 222 karaoke rooms, another popular activity derived from China, Korea and Japan. Furthermore, Major possesses a property development division that leases retail space as well as owns a 25% stake in shopping mall developer, Siam Future Development plc. The company also has a stake in California WOW Xperience plc, the largest fitness center operator in Thailand with ten outlets across the country. Its ticket subsidiary, Thaiticketmajor, sells advanced cinema tickets as well as tickets for a host of events such as concerts and has extensive growth potential as it seeks to digitise its operations to meet expectations of the youthful Asian population.

Higher levels of service - Asian customisation

On a macroeconomic level, the cinema business has a lot of room to grow just within Thailand alone. There are currently 800 cinema screens in Thailand with Major operating roughly 55% of these. Thailand sells just under 50 million movie tickets annually. Juxtaposed to the 2,000 cinema screens and 200 million tickets sold annually in South Korea – a country with 17 million less people than Thailand and you can perceive the great domestic potential in Thailand, particularly as ticket prices in Thailand are about 50% less than average prices in South Korea. Major, as the largest cinema operator with monopolistic market share and international expansion ambitions, will surely be a great value investment. Its currently trading at THB 19.40 on Bangkok's SET exchange within a 52 week range of THB 14.70-24.90 and with a market capitalization of THB 17.2 billion. The added bonus of investing in Major shares is their annual 5.05% dividend yield. So invest and watch this Asian blockbuster explode onto the ASEAN scene.