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Red carpet premiere

23 September 2015 By Robyn Mak

IMAX is cashing in on China’s box office boom. The company best known for its super-sized movie screens has launched a listing of its Chinese unit. The offering gives private equity backers an exit and helps lock in local partners. More importantly, it allows IMAX to display the value of moviegoers in the People’s Republic to shareholders back home.

Though IMAX has operated in China for over 15 years, it wasn’t until the release of Avatar in 2010 that Chinese audiences became hooked. The IMAX 3D version of the blockbuster was so popular that cinemas in Shanghai were charging 200 yuan ($31) a ticket, according to state media.

IMAX is betting on continued hits in a market where box office takings are set to expand at an annual rate of 35 percent for the next three years, overtaking the United States, according to EntGroup. Last year, the average American went to see four movies, compared with just 0.6 for each Chinese citizen. By taking a cut of the ticket revenue, IMAX China benefits directly from rising attendance.

A separate listing rewards private equity backers China Media Capital and FountainVest Partners, which bought 20 percent of IMAX China at a $400 million valuation less than two years ago. At the top of the indicative price range, their stake is now worth almost four times as much. The offering also allows IMAX to bring in new local partners.

The main thrill, however, is showcasing value for shareholders of IMAX Corporation. China’s movie industry is a bright spot in a slowing economy. Shares in Wanda Cinema, one of IMAX China’s main customers, trade on a multiple of more than 70 times this year’s expected earnings.

Assuming IMAX China’s underlying net income doubles this year, investors will be paying a 30 times multiple at the top end of the range. At that price, the parent company will pocket almost $100 million from the IPO and retain a 70 percent stake with a value of $1.1 billion – equivalent to just under half its current $2.4 billion market value. Shareholders will be hoping China’s big-screen hits keep coming.


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