Targetting the young, GSC can be PPB’s hidden gold mine

IF there is one intriguing core business within PPB Group Bhd, it has to be its film exhibition and distribution segment which might seem to be ‘a little out of place’ in the group’s very much brick-and-mortar set-up.

Interestingly even as patronage of cinemas has taken a beating – no thanks to the movement restrictions following the re-imposition of the movement control order (MCO 2.0) which has just been lifted today (March 5) – the group remains sanguine about the outlook of this business segment.

For the record, Golden Screen Cinemas (GSC) has recently consolidated its position as Malaysia’s largest cinema exhibitor following the acquisition of MBO Cinema.

The acquisition is anticipated to be concluded by the end of June 2021 with re-branding activities to commence once the deal has been completed. However, GSC did not disclose the acquisition value.

Although figures pertaining to capacity have not been finalised, GSC today boasts 352 screens in 35 locations nationwide while MBO (the third largest cinema chain in Malaysia after GSC and TGV Cinemas) has a total of 27 cineplexes across 10 states (according to its official website).

In its latest company update on PPB, MIDF Research expects the group’s film exhibition and distribution segment to recover in the 2H FY2021 with meaningful recovery achieved in FY2022.

The research house also shared that the group is planning to boost the business segment by (i) expanding its food and beverages services, and (ii) going further into e-commerce business.

“In addition, GCS will introduce a new food & beverage (F&B) brand namely Happy Food Co that will be established across selected GSC cinemas,” the research house pointed out. “The first cafe is expected to be launched in Southkey, Johor Bahru in 2H FY2021.”

More broadly, MIDF Research noted that the COVID-19 pandemic has impacted the most PPB’s film exhibition and distribution and the property divisions.

“However, we opine that the film exhibition and distribution to slowly recover moving forward given that GCS will re-open and start to operate on March 5 (today),” the research house projected.

“On a side note, we also expect the contribution from its Singapore-listed associate company, Wilmar, to continue to provide support to the group’s earnings.”

All factors considered, the research house maintained its “neutral” recommendation on PPB with an unchanged target price of RM18.64 given that GSC did not elaborate on the size and value of its MBO acquisition.

At the close of today’s morning trading session, PPB was up 6 sen or 0.32% to RM18.66 with 164,400 shares traded, thus valuing the company at RM26.55 bil. – March 5, 2021

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