TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Major Cineplex
Group PLC (MAJOR) at “A-” with “stable” outlook. The ratings reflect the company’s leading
position in the Thai movie exhibition industry, its prime location properties, and capable
management team. These strengths are partially offset by exposure to uncontrollable factors
such as the number of films released, film popularity, shortening theatrical release periods
prior to the distribution of DVD/VCD (digital versatile disc/video compact disc),
competition from other forms of entertainment, and the proliferation of pirated home video
products.
The “stable” outlook reflects the expectation that MAJOR will be able to maintain its leading market position in the movie exhibition industry and sustain a satisfactory level of performance. Investment opportunities or dividend payments should be prudently considered and should not adversely affect the company’s financial position and liquidity.
TRIS Rating reported that MAJOR is the largest movie exhibitor in Thailand, with approximately 80% market share in terms of first-week box office sales. The company was founded in 1994 by Mr. Vicha Poolvaraluck, who currently owns 37% of the total shares. The five principal lines of MAJOR’s business are cinema, bowling and karaoke, advertising media, space rental and services, and film distribution. As of September 2010, MAJOR operated 50 cinemas, offering a total of 369 screens and more than 88,000 seats. MAJOR has 27 cinema branches in Bangkok and vicinity, and 23 branches upcountry. MAJOR also has 26 bowling and karaoke branches, with 480 bowling lanes and 309 karaoke rooms. In addition, the company manages 43,666 square meters (sq.m.) of space for rent. In Bangkok and the surrounding provinces, MAJOR has located its theaters across many business centers and key communities, using various brands to capture a broad range of customer groups.
TRIS Rating said, MAJOR’s operating performance is partly supported by its strong
relationships with film distributors. Admissions revenue is related to the number of films
released as well as the quality and popularity of the films. However, as mentioned above,
MAJOR faces several significant threats from uncontrollable factors. These threats could
dilute the appeal of an out-of-home motion picture offering. However, no other form of
entertainment is as yet a perfect substitute for the moviegoing experience.
Despite the political unrest and economic turmoil in 2009 and the first half of
2010, MAJOR reported Bt5,561 million in total revenue in 2009, a 4% increase from the
previous year due mainly to the release of many blockbuster films in the last quarter of
2009. For the first nine months of 2010, total revenue leaped by 17% year-on-year (y-o-y) to
Bt4,562 million. The growth was due to several reasons: the strong box office performance of
Thai films in the third quarter of 2010, more retail space from the newly-opened Esplanade
Ngamwongwan-Khaerai branch, and a strong recovery in advertising sales. The cinema business
demonstrated resilience despite the economic and political turmoil, as box office receipts
are driven by film popularity. The theater is a form of entertainment which is inexpensive
and easily accessible, especially with nationwide coverage of theatre screens. The cinema
business contributed approximately half of MAJOR’s total revenue and EBITDA (earnings before
interest, tax, depreciation and amortization). Other businesses, however, are more sensitive
to economic conditions. For example, the advertising business reported a 38% decline in
revenue in 2009, but grew by 31% y-o-y in the first nine months of 2010. The impact was
worse for bowling and karaoke business. This segment reported a 15% decline in revenue in
2009 and an 8% y-o-y decline in the first nine months of 2010.
The ratio of operating income before depreciation and amortization to sales
decreased from 31% in 2008 to 26% in 2009. The drop was due to a substantial decline in high-
margin advertising revenues and high selling and administration expenses. However, for the
first nine months of 2010, The ratio of operating income before depreciation and
amortization to sales rebounded to 31% as all business units, except bowling and karaoke,
grew along with the economic recovery while the selling and administration expenses seemed
to be in much better control. MAJOR maintained a slightly high leverage level, amounting at
Bt3,740 million at the end of 2009 and Bt2,998 million at the end of September 2010,
compared with Bt2,273 million in 2008. The total debt to capitalization ratio increased from
56.1% in 2008 to 60.8% in 2009 and stood at 57.3% at the end of September of 2010. Funds
from operations (FFO) has been maintained at over Bt1,000 million annually since 2005. Cash
flow protection remained solid, though slightly softened in 2009 as measured by the FFO to
total debt ratio of around 15% and the EBITDA interest coverage ratio was almost 4 times
during 2008 through the first nine months of 2010, said TRIS Rating. -- End
Company Rating: Affirmed at A- Issue Rating: MAJOR126A: Bt1,500 million senior debentures due 2012 Affirmed at A- Rating Outlook: Stable
? Copyright 2010, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.