New 5 Year Plan Announced: IMAX International Growth Only Beginning

Jun.26.12 | About: IMAX Corporation (IMAX)

IMAX (NYSE:IMAX), the oversized movie theater company, recently held its 2012 Analyst Day. While listening to the call, you can hear the five year plan as well as ambitious international goals to capture additional revenue. Imax is a great international company with 48% of its 2011 sales coming from international markets. Through part of 2012, international markets have actually overtaken domestic sales (53%). A five year plan was put in place to aggressively grow the company's base of movie screens and capture additional profits in the process. Below is a table that represents some of the five year plans:

  Year 1 Year 2 Year 3 Year 4 Year 5
Revenue $303 (MIL) $341 $381 $422 $465
Earnings from Operations $84 $114 $145 $178 $213
Total Screens 617 737 857 977 1097
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The table below shows the current screen count (as of 03/31/12) along with what the company believes is the penetration rate of each region.

  Total Now Long Term Total Penetration %
Domestic (US, Canada) 301 485 62
China 73 400 18
Rest of Asia (w/o China) 42 225 19
EMEA 77 415 19
Latin America 17 175 10
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Through the end of March, IMAX is only 30% to its long term goal of 1700 theaters around the world. Imax thinks they can build 120 IMAX theaters each year within the next five years. Half of the screens will be sold to movie theaters and half will be partially owned under joint ventures. Joint ventures are more beneficial for IMAX as they get revenue from each movie and concession revenue as well.

IMAX has doubled the number of screens in Canada over the last two years. In the United Kingdom, IMAX has deals in place with the two biggest movie theater companies (Cineworld, Odeon) to grow throughout the region.

Russia has been one of the biggest growth markets for IMAX. IMAX entered the country in 2003 and it now represents the third largest market for IMAX screens. In the last two years, the company has triples the number of screens in the country. IMAX has 23 screens in the large country with a long backlog to more than double that number. A new deal will bring three more IMAX theaters to Russia in the near term. The deal, announced June 15th, will have IMAX theaters open in July 2012 and September 2013.

In China, IMAX is seeing incredible growth. Same store sales at IMAX screens open more than a year were up 120%. China's backlog consists of over 125 IMAX screens to be added to the 73 already open in the most populous nation. More importantly, Chinese consumers are becoming more aware of the IMAX brand. In fact, IMAX has 94% brand awareness in Tier 1, 2, and 3 cities throughout China. The middle class is expected to rise to 800 million people in China by the year 2030. Currently, the United States has 365 million people considered in the middle class.

In June, IMAX also entered into an agreement with Bona Film Group (NASDAQ:BONA). I wrote recently about Bona Film Group and their new partnership with News Corporation. The new partnership is the first theater deal between Bona Film Group and IMAX. A movie, Flying Swords of Dragon Gate, was released in IMAX screens throughout China. The movie from Bona Film Group is also coming to the United States on select IMAX screens. The new IMAX theater, scheduled to open in September of 2012, could be the first of many signed by Bona Film Group.

IMAX announced a recent deal with Caspian Capital Limited to bring its first IMAX theater to the country of Azerbaijan. The theater will open in October of this year. The new IMAX will be located in the capital city of Baku.

IMAX continues to be one of my top holdings in my personal stock portfolio. I have accumulated more shares several times since writing about the company on Seeking Alpha. The international expansion is nowhere near being complete for IMAX. The company also has one of its strongest years ever planned for 2012. I wrote about the 2012 offerings here. I felt so confident in IMAX's strong 2012 slate that I named it one of my Top Ten Stocks for the year in my annual list. IMAX shares are up 25% since the beginning of the year but still have plenty of room to run. I would buy before The Amazing Spider-Man and The Dark Knight Rises hit theaters.

Disclosure: I am long IMAX.