MKM Partners analyst Eric Handler is seeing box office gold. But instead of buying tickets to this weekend’s latest release, he’s stocking up on shares of Regal Entertainment Group (RGC) Imax Corp. (IMAX) and Cinemark (CNK).
Handler notes that film audiences are putting in a strong showing so far in 2012, easily topping traffic from early last year. As for Regal, he reiterated his Buy rating and $15 price target given an improving outlook and the company’s generous 5.9% yield, which he sees as safe and stable. He raised his first quarter estimates given better-than-anticipated overall first quarter box office trends, (he is projecting 18% growth, nearly double his previous 8.5% forecast.)
Handler reiterated a Buy rating and increased his price target on Cinemark by $1 to $26, also on the strength of 18% growth in the first quarter. He notes that this trend has eased fears about a weak domestic market following an underwhelming 2011 at the box office. He notes that while some may be concerned about weakness in Latin America, a part of Cinemarks’ growth strategy, a 12% increase in the number of screens should provide for low-single-digit international gains despite a drop off in attendence.
Finally, for IMAX, one of his top picks for the year, Hander reiterated a Buy rating and $29 price target. He expects the company to add 130 new screens in 2012 and raised his global box office forecast to $115 million for the first quarter, writing that The Hunger Games could generate more than $10 million on domestic IMAX screens this weekend and $14 million of box office revenue for the week.