Shares of IMAX Corporation IMAX gained 3.15% on May 28 to close the day’s trading at $39.99. The surge came following the news that IMAX’s Chinese unit (IMAX China Holding) has filed an application with the Hong Kong stock exchange to get the shares of the division listed on the unit. Additional details about the proposed initial public offering (IPO) have not been revealed.
The move is in line with the company’s objective to expand in China where the rapidly growing movie market offers significant commercial potential. China had 239 IMAX screens at the end of the first quarter of 2015 (the comparable figure at the end of 2012 was only 128). IMAX states that 219 more theaters are scheduled to be set up in China by 2021. The company intends to set up a digital re-mastering facility in China to convert Chinese-language movies to the IMAX format. The facility is expected to be fully functional by Dec 31, 2015. IMAX’s growth in China has benefited from its associations with Chinese media companies, including Wanda Cinema.
The tremendous potential of the movie market in the country is highlighted by China’s box-office revenues that surged approximately 36% year over year to $4.77 billion in 2014. Riding on the growth potential, the Chinese division of IMAX generated profits of $22.6 million in 2014, up 29%. IMAX intends to make the Chinese market its largest, going forward. The tremendous potential of the Chinese movie market has prompted several analysts to believe that it will surpass the U.S. movie market by 2019/2020.
We believe investors will remain glued to updates on the proposed IPO. Meanwhile, IMAX is expected to gain from blockbuster Hollywood releases, increasing number of theater installations, higher backlogs and a growing presence in China, going forward.
Zacks Rank
IMAX currently has a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the sector are The Walt Disney Company’s DIS, Comcast Corporation CMCSA and Liberty Global LBTYA. All the three stocks carry a Zacks Rank #2 (Buy).
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