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The blockbuster performance of Jurassic World this Summer has been an unexpected boon to movie theater operators such as AMC Entertainment Holdings Inc. (AMC), Regal Entertainment Group (RGC), Cinemark Holdings Inc. (CNK), and to theater technology companies like Imax Corp. (IMAX) and RealD Inc. (RLD).
The group looks forward to an even bigger holiday season, with Star Wars 7 and the next Hunger Games installment slated for release. After a disappointing 2014, theaters are bustling. Amid the anticipation of the coming blockbusters, the year's biggest cliffhanger may be a strategic review by RealD and the role, if any, that activist shareholder Starboard Value LP will play in the company's plans.
"A couple of months ago it looked like the second quarter wasn't going to be up to expectations," said James Goss of Barrington Research Associates Inc. "Then we had another billion dollar movie come through with Jurassic World. All of the sudden, if anything, it might be ahead of expectations."
Jurassic World, from Comcast Corp.'s (CMCSA) Universal, is the third film this year to gross more than $1 billion. The others are Universal's Furious 7 and Walt Disney Co.'s (DIS) Avengers: Age of Ultron.
Goss expects the domestic box office to hit about $11.2 billion in 2015. The U.S. box office fell below $10.4 billion in 2014, according to Amazon.com Inc.'s (AMZN) Box Office Mojo, from more than $10.9 billion the year before. "The rising tide is going to lift all of them," Wedbush Securities Inc. analyst Michael Pactor said of the theater operators and the exhibition technology companies.
Overseas, the plot is a bit murkier. Cinemark has screens in more than a dozen Latin American countries, and Pactor suggested the company could suffer from exchange rates. On the other hand, Imax benefits from fast growth in China, said Barrington's Goss. The company plans to spin off its Chinese unit through an IPO. "Imax should benefit a bit more because there is a greater concentration of blockbuster Imax films," Pactor noted.
China represents an opportunity for RealD as well. Fueled by expansion there, B. Riley & Co. analyst Eric Wold wrote that RealD could post Ebtida growth of 21% on average for 2014 to 2016, while Imax could have a 24.3% growth rate. Wold projects that theater operators will have average Ebitda growth rate of 11.9% for the period.
The most compelling story line for RealD is the resolution of a strategic review that the company undertook after feeling pressure from activist shareholder Starboard Value. The activist fund offered $12 per share for the provider of three-dimensional technology last October, valuing the RealD's equity at about $600 million. RealD rejected the offer and announced in February that it had hired Moelis & Co. LLC.
Resolution could come in the next weeks. RealD postponed the period during which investors can nominate directors in April. The window for nominating directors opened June 15 and closes on July 15. "Given that we see no other reason for RealD's Board to move that proxy window back by two months if not to accommodate Starboard, we continue to believe they are working together to boost shareholder value with news to come," Wold wrote. The end result could be "anything from a massive return of capital to a go-private/sale of the company decision," Wold suggested.
RealD, whose handiwork is on display in 3-D versions of Jurassic World, Mad Max: Fury Road and the Avengers, declined to comment on the review. Starboard did not respond to a query.
The business outlook has certainly improved from last year, when Starboard began to press the company. Disappointing ticket sales in 2014 could have been influenced by a few events, Barrington analyst Goss said. Universal planned to release Furious 7 on the Fourth of July, which can be the biggest weekend of the year for theater operators. The studio postponed the release after the death of star Paul Walker. The box office also lacked a late-summer animated feature. "That was at least several hundred million of revenues," Goss said.
This year, Hollywood could release five films grossing more than $1 billion worldwide. Candidates to join Jurassic World, Furious 7 and Avengers at the top of 2015 the box office include Hunger Games: Mockingjay Part 2, which Lions Gate Entertainment Corp. (LGF) releases on Nov. 20, and Disney's Star Wars: The Force Awakens, which opens Dec. 18.
Read more: Jurassic World is just the beginning for theaters and movie tech providers - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?) http://www.thedeal.com/content/tmt/jurassic-world-is-just-the-beginning-for-theaters-and-movie-tech-providers.php#ixzz3fFixrQfI
The group looks forward to an even bigger holiday season, with Star Wars 7 and the next Hunger Games installment slated for release. After a disappointing 2014, theaters are bustling. Amid the anticipation of the coming blockbusters, the year's biggest cliffhanger may be a strategic review by RealD and the role, if any, that activist shareholder Starboard Value LP will play in the company's plans.
"A couple of months ago it looked like the second quarter wasn't going to be up to expectations," said James Goss of Barrington Research Associates Inc. "Then we had another billion dollar movie come through with Jurassic World. All of the sudden, if anything, it might be ahead of expectations."
Jurassic World, from Comcast Corp.'s (CMCSA) Universal, is the third film this year to gross more than $1 billion. The others are Universal's Furious 7 and Walt Disney Co.'s (DIS) Avengers: Age of Ultron.
Goss expects the domestic box office to hit about $11.2 billion in 2015. The U.S. box office fell below $10.4 billion in 2014, according to Amazon.com Inc.'s (AMZN) Box Office Mojo, from more than $10.9 billion the year before. "The rising tide is going to lift all of them," Wedbush Securities Inc. analyst Michael Pactor said of the theater operators and the exhibition technology companies.
Overseas, the plot is a bit murkier. Cinemark has screens in more than a dozen Latin American countries, and Pactor suggested the company could suffer from exchange rates. On the other hand, Imax benefits from fast growth in China, said Barrington's Goss. The company plans to spin off its Chinese unit through an IPO. "Imax should benefit a bit more because there is a greater concentration of blockbuster Imax films," Pactor noted.
China represents an opportunity for RealD as well. Fueled by expansion there, B. Riley & Co. analyst Eric Wold wrote that RealD could post Ebtida growth of 21% on average for 2014 to 2016, while Imax could have a 24.3% growth rate. Wold projects that theater operators will have average Ebitda growth rate of 11.9% for the period.
The most compelling story line for RealD is the resolution of a strategic review that the company undertook after feeling pressure from activist shareholder Starboard Value. The activist fund offered $12 per share for the provider of three-dimensional technology last October, valuing the RealD's equity at about $600 million. RealD rejected the offer and announced in February that it had hired Moelis & Co. LLC.
Resolution could come in the next weeks. RealD postponed the period during which investors can nominate directors in April. The window for nominating directors opened June 15 and closes on July 15. "Given that we see no other reason for RealD's Board to move that proxy window back by two months if not to accommodate Starboard, we continue to believe they are working together to boost shareholder value with news to come," Wold wrote. The end result could be "anything from a massive return of capital to a go-private/sale of the company decision," Wold suggested.
RealD, whose handiwork is on display in 3-D versions of Jurassic World, Mad Max: Fury Road and the Avengers, declined to comment on the review. Starboard did not respond to a query.
The business outlook has certainly improved from last year, when Starboard began to press the company. Disappointing ticket sales in 2014 could have been influenced by a few events, Barrington analyst Goss said. Universal planned to release Furious 7 on the Fourth of July, which can be the biggest weekend of the year for theater operators. The studio postponed the release after the death of star Paul Walker. The box office also lacked a late-summer animated feature. "That was at least several hundred million of revenues," Goss said.
This year, Hollywood could release five films grossing more than $1 billion worldwide. Candidates to join Jurassic World, Furious 7 and Avengers at the top of 2015 the box office include Hunger Games: Mockingjay Part 2, which Lions Gate Entertainment Corp. (LGF) releases on Nov. 20, and Disney's Star Wars: The Force Awakens, which opens Dec. 18.
Read more: Jurassic World is just the beginning for theaters and movie tech providers - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?) http://www.thedeal.com/content/tmt/jurassic-world-is-just-the-beginning-for-theaters-and-movie-tech-providers.php#ixzz3fFixrQfI