Star Wars fans in storm trooper costumes turned out in force to see the latest movie at an IMAX theatre. Picture: Josie Hayden
The blockbuster performance of the new film Star Wars: The Force Awakenswill drive Village Roadshow’s cinema business division to 12.3 per cent growth for the first six months of the 2016 financial year, according to a new research note.
However, the film will fall short of Avatar’s Australian gross box office revenue of $115 million but still edge towards $102m, the Citi analysis says.
Its research suggests Star Wars will continue to earn money at the Australian box office for some time, particularly because after four weeks with earnings of $79.9 million, it is 26 per cent ahead of Avatar’s take at the same time. The top films of recent years remain in cinemas for an average of 11 weeks; Avatar remained in cinemas for 38 weeks.
Compared to the first half of 2014-15, Australian weekend box office revenues grew 17 per cent for the June 30 to December 31 period, driven by Star Wars: The Force Awakens, the James Bond film Spectre ($34m) and The Hunger Games: Mockingjay Part 2 ($29m), Citi reports.
Cinema exhibition represents 43 per cent of Village’s earnings before interest and tax.
But it notes the second half of this financial year is unlikely to replicate the first half of last year when Fast and Furious 7 ($43m), Jurassic World ($52m) and The Avengers: Age of Ultron ($40m) propelled the Australian box office to a record high.
Citi also notes that a number of factors across its theme park and exhibition divisions will drive Village Roadshow.
Growth drivers for the cinema business might include expansion of its food and beverage services, which offer high margins, improved seating in cinemas and even “dynamic” pricing.
The Citi note, by Sam Teeger, was independent of last week’s Gold Coast Theme Park’s analysis, which looked at a segment in which VRL owns Wet’n’Wild, Sea World, Warner Bros Movie World and others. Given the relative lack of rainfall on the Gold Coast this year, and traffic data from Gold Coast Airport showing an increase in inbound international and domestic passengers, VRL is likely to benefit.
Consequently, Citi recommends a target price of $7.75 for the stock that closed at $6.64, down 2.9 per cent.
VRL Price at posting:
$6.76 Sentiment: Buy Disclosure: Held
