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>> Pyramid Saimira Theatre
Keynote Capitals recommends to buy Pyramid Saimira Theatre 13 December 2007 Source: www.keynoteindia.net
Research Highlights: Largest theatre chain The Pyramid Saimira Group currently owns the largest chain of cinema theatres in Asia through group flagship Pyramid Saimira Theatre Ltd. (PSTL). PSTL is set to become the world’s largest theatre chain company soon. Its geographical footprint spans across India, SE Asia (Singapore and Malaysia) and the US. Its interests include film and television content production, film distribution and exhibition. Its well-experienced and aggressive management and unique business model are its major strengths. The group enjoys a tremendous early mover advantage in the film exhibition space. Innovative business models of both PSTL and the group PSTL’s innovative business model involves benefit of scale, increased negotiation power with producers, distributors and theatre owners and scalability. PSTL focuses on leasing properties only after thorough due diligence and market research. Growth and success of the PSTL group is attributable to the uniqueness of its business model, wherein content distribution is closely linked with exhibition strengths and constitutes a strong entry barrier. Further, the strategy of content exclusivity leads to high occupancy rates, contributing to profitability in a big way. Spanning the entire value chain from content production to distribution… Its production arm, Pyramid Saimira Productions Ltd. (PSPL) plans to produce 50 films in a year in all Indian languages, going forward. Its content distribution arm Pyramid Saimira Entertainment Ltd. (PSEL) distributes films in various Indian languages as a content agglomerator in India as well as in overseas markets. Apart from these above, it has other entities for exploiting technology & technology advancements, advertisements, realty and post production & visual effects. …to exhibition In the film exhibition sector, PSTL is already the largest domestic theatre chain and also plans to have a global footprint. Currently it has operations in Malaysia and the US through subsidiaries. Foray into theatre advertising PSTL recently acquired 51% stake in Mumbai based Dimples Cine Advertising Pvt. Ltd. (Dimples). Through this acquisition PSTL will roll out a massive business plan for Dimples, thus it will have access to 4000 digital screens by FY10. With the stake acquisition in Dimples, PSTL will foray in theatre advertising, out-of-home advertising, etc. Interests in related businessess through subsidiaries & JVs PSTL has interests in related businesses of production and distribution, through subsidiary companies and joint ventures. Each of these will meet financial closure independently through issue of equity and / or debt. Potential for value unlocking through subsidiaries We believe there is potential for tremendous unlocking value in the subsidiary companies, viz., PSPL and PSEL. We note that Eros International, also a leading film distribution company, which listed on the LSE Alternative Investment Market (AIM) in the UK last year, trades at 29.7x FY08 earnings. We believe PSEL, if listed, can get a similar if not better valuation by virtue of its strong promoter background and track record. Growth story to unfold… On a standalone basis, topline and bottomline grew by 62.4% and 131.7% respectively in H1-FY08, over FY07. We expect sales and earnings growth at CAGR of 53.8% and 58.3% respectively over FY08-10. Valuation The stock trades at 9.9x FY08E and 5.2x FY09E earnings respectively, which is quite attractive vis-?-vis peers Adlabs Films (55.2x FY09E), Inox Leisure (24.2x FY09E), Shringar Cinemas (19.7x FY09E), and Cinemax India (10.9x FY09E). In view of its plans of a global footprint going forward, we would benchmark PSTL vis-a-vis US peers Regal Entertainment Group and Cinemark USA, which trade at 21.5x and and 21.1x Dec-2008 earnings respectively. |
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