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Pi Securities PCL, Thailand

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Equity Bottom-Up

<ul>
<li>We expect the company’s operating performance to improve gradually from the bottom in 3Q21as there are number of quality movies to be released after been postponed upon restricted measures induced </li>
<li>Expect the company to report Bt47m net profit in 4Q21, seven-quarter high in terms of core business operation</li>
<li>EBITDA in 4Q21 is expected to turn positive as it driven by pent-up demand after lockdown together with impressive ticket sales from Spider-Man: No Way Home.</li>
</ul>


We expect the company’s operating performance to improve gradually from the bottom in 3Q21as there are number of quality movies to be released after been postponed upon restricted measures induced 
Expect the company to report Bt47m net profit in 4Q21, seven-quarter high in terms of core business operation
EBITDA in 4Q21 is expected to turn positive as it driven by pent-up demand after lockdown together with impressive ticket sales from Spider-Man: No Way Home.


MAJOR: Expect EBITDA to Turn Positive from 4Q21 and Onward to 2022

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>On the 5 July 2021, <a href="https://www.smartkarma.com/entities/major-cineplex-group-pcl" target="_blank" data-smartkarma-citation="entities:16662:1" rel="noopener">Major Cineplex Group (MAJOR TB)</a>'s board <a href="https://major.listedcompany.com/newsroom/050720211745440725E.pdf" target="_blank" rel="noopener">approved</a> the entering of a MOU with <a href="https://www.smartkarma.com/entities/central-pattana-pcl-0b7fb113-16e1-4535-be8b-02dce5bbcd92" target="_blank" data-smartkarma-citation="entities:17188:1" rel="noopener">Central Pattana Pub (CPN TB)</a> in relation to its shares in shopping mall operator <a href="https://www.smartkarma.com/entities/siam-future-development-pcl" target="_blank" data-smartkarma-citation="entities:4373:1" rel="noopener">Siam Future Development (SF TB)</a>, at a price of Bt12/share. An IFA was appointed to assess the sale and its opinion on the <a href="https://major.listedcompany.com/newsroom/060820211832280109E.pdf" target="_blank" rel="noopener">19 July</a>, concluded the "<em>Transaction is reasonable with price and conditions that are fair</em>". A SPA was <a href="https://major.listedcompany.com/newsroom/250820211847500685E.pdf" target="_blank" rel="noopener">entered into</a> on the 25 August with an expected completion on the 30 August. </p>
</div>
<div>
<p>CPN <a href="https://www.set.or.th/set/newsdetails.do?newsId=16302807319920&amp;language=en&amp;country=US" target="_blank" rel="noopener">completed</a> the purchase of shares in Siam Future on 30 August 2021. After the completion of shares purchase, the number of shares held by CPN was 56.26%. In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company.  Therefore, CPN was required to make a Tender Offer for the remaining shares in Siam Future, also at Bt12/share. A mandatory Tender Offer is always unconditional. </p>
</div>
<div>
<p>The Tender Offer doc (247-4) for Siam Future was <a href="https://www.set.or.th/set/pdfnews.do?newsId=16311444618740&amp;sequence=2021100646" target="_blank" rel="noopener">tabled</a> on the 9 September. The Offer period was for 25 business days - and closed on the 18 October. The payment date was the 20 October. The IFA reckoned the Offer was <a href="https://www.set.or.th/set/pdfnews.do?newsId=16326998697600&amp;sequence=2021104947" target="_blank" rel="noopener">fair</a>. At the close of the Offer, CPN held <a href="https://www.set.or.th/set/pdfnews.do?newsId=16346869712030&amp;sequence=2021112797" target="_blank" rel="noopener">96.24%</a>. </p>
</div>
<p>There are no provisions regarding minority squeeze-out mechanisms under Thai law. However, if the board of directors approves a proposed de-listing,  an independent financial adviser provides its opinion to shareholders on the merits of the proposal, <em>and</em> the company gains approval (≥ 75% for, ≤10% against) from its shareholders to voluntarily delist, then a company can be delisted. The company is permitted to purchase shares tendered in accordance with SEC and Capital Market Supervisory Board rules. </p>
<p>On page 57 (of Siam Future's Tender Offer doc's <a href="https://www.set.or.th/set/pdfnews.do?newsId=16311444618740&amp;sequence=2021100646" target="_blank" rel="noopener">PDF</a>), it states:</p>
<blockquote>
<p>After the Tender Offer,<strong> the Offeror has an intention to delist the Business from being a listed company on the SET during the period of 12 months after the end of the Offer Period</strong>. Currently, the Offeror is under the possibility study of proceeding such transaction under relevant rules and regulations, including but not limited to, assessment of possibility of obtaining the approval from the shareholders meeting of the Business, of which has not reached a conclusion on delisting of the Business from being a listed company on the SET.</p>
</blockquote>
<p>With 96.24% held, a Delisting Offer from CPN is likely imminent. Such an Offer at the prior Tender Offer price provides 20% upside to the current price. </p>


On the 5 July 2021, Major Cineplex Group (MAJOR TB)'s board approved the entering of a MOU with Central Pattana Pub (CPN TB) in relation to its shares in shopping mall operator Siam Future Development (SF TB), at a price of Bt12/share. An IFA was appointed to assess the sale and its opinion on the 19 July, concluded the "Transaction is reasonable with price and conditions that are fair". A SPA was entered into on the 25 August with an expected completion on the 30 August. 


CPN completed the purchase of shares in Siam Future on 30 August 2021. After the completion of shares purchase, the number of shares held by CPN was 56.26%. In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company.  Therefore, CPN was required to make a Tender Offer for the remaining shares in Siam Future, also at Bt12/share. A mandatory Tender Offer is always unconditional. 


The Tender Offer doc (247-4) for Siam Future was tabled on the 9 September. The Offer period was for 25 business days - and closed on the 18 October. The payment date was the 20 October. The IFA reckoned the Offer was fair. At the close of the Offer, CPN held 96.24%. 

There are no provisions regarding minority squeeze-out mechanisms under Thai law. However, if the board of directors approves a proposed de-listing,  an independent financial adviser provides its opinion to shareholders on the merits of the proposal, and the company gains approval (≥ 75% for, ≤10% against) from its shareholders to voluntarily delist, then a company can be delisted. The company is permitted to purchase shares tendered in accordance with SEC and Capital Market Supervisory Board rules. 
On page 57 (of Siam Future's Tender Offer doc's PDF), it states:

After the Tender Offer, the Offeror has an intention to delist the Business from being a listed company on the SET during the period of 12 months after the end of the Offer Period. Currently, the Offeror is under the possibility study of proceeding such transaction under relevant rules and regulations, including but not limited to, assessment of possibility of obtaining the approval from the shareholders meeting of the Business, of which has not reached a conclusion on delisting of the Business from being a listed company on the SET.

With 96.24% held, a Delisting Offer from CPN is likely imminent. Such an Offer at the prior Tender Offer price provides 20% upside to the current price. 

Buy Siam Future Development (SF TB). Then Buy Some More

<div>
<p>According to the <a href="https://investor.majorcineplex.com/en/business-characteristics/strategic-invesments" target="_blank" rel="noopener">website</a> of Thailand's largest cinema operator <a href="https://www.smartkarma.com/entities/major-cineplex-group-pcl" target="_blank" data-smartkarma-citation="entities:16662:1" rel="noopener">Major Cineplex Group (MAJOR TB)</a>'s<a href="https://investor.majorcineplex.com/en/business-characteristics/strategic-invesments" target="_blank" rel="noopener"></a>, the rationale for its investment in shopping mall operator <a href="https://www.smartkarma.com/entities/siam-future-development-pcl" target="_blank" data-smartkarma-citation="entities:4373:1" rel="noopener">Siam Future Development (SF TB)</a> (SFD) was synergistic. SFD "<em>is an anchor tenant that generates traffic to the lifestyle malls</em>". </p>
<p>MAJOR initially acquired 77.8mn shares in SFD in 2003 at Bt1.70/share. MAJOR held <a href="https://investor.siamfuture.com/misc/ar/20170308-sf-ar2016-en-01.pdf" target="_blank" rel="noopener">24.89%</a> (422.2mn shares) in 2016 ahead of a Tender Offer (at <a href="http://capital.sec.or.th/webapp/corp_fin/datafile/TO/0676000048247-42016-12-20e01.pdf?ts=1499458214" target="_blank" rel="noopener">Bt6.20/share</a>), <a href="https://investor.siamfuture.com/misc/ar/20190311-sf-ar2018-en.pdf" target="_blank" rel="noopener">26.25%</a> in 2017, 28.09% in 2018 &amp; 2019, and 29.13% as at the 31 Dec <a href="https://investor.siamfuture.com/misc/ar/20210525-sp-ar2020-en.pdf" target="_blank" rel="noopener">2020</a>. It currently holds 647.158mn shares or 30.36%.</p>
<p>On the 5 July, MAJOR's board <a href="https://major.listedcompany.com/newsroom/050720211745440725E.pdf" target="_blank" rel="noopener">approved</a> the entering of a MOU with <a href="https://www.smartkarma.com/entities/central-pattana-pcl-0b7fb113-16e1-4535-be8b-02dce5bbcd92" target="_blank" data-smartkarma-citation="entities:17188:1" rel="noopener">Central Pattana Pub (CPN TB)</a> in relation to its shares in SFD, at a price of Bt12/share.</p>
<p>An IFA was appointed to assess the sale and its opinion on the <a href="https://major.listedcompany.com/newsroom/060820211832280109E.pdf" target="_blank" rel="noopener">19 July</a>, concluded the "<em>Transaction is reasonable with price and conditions that are fair</em>".</p>
<p>A SPA was <a href="https://major.listedcompany.com/newsroom/250820211847500685E.pdf" target="_blank" rel="noopener">entered into</a> yesterday with an expected completion on the 30 August. </p>
<p>In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company. </p>
<p>Therefore CPN is required to make a tender offer for the remaining shares in SFD at the same price of Bt12/each upon the completion of the SPA.  <strong>A mandatory tender offer must be unconditional. </strong></p>
<p>SFD shares gained ~40% in the month prior to the 5 July announcement, on evident news leakage. Bt12/share is also a lifetime high. I would not be surprised if the tender offer leads to a subsequent delisting offer from CPN.</p>
<p>More below the fold.</p>
</div>


According to the website of Thailand's largest cinema operator Major Cineplex Group (MAJOR TB)'s, the rationale for its investment in shopping mall operator Siam Future Development (SF TB) (SFD) was synergistic. SFD "is an anchor tenant that generates traffic to the lifestyle malls". 
MAJOR initially acquired 77.8mn shares in SFD in 2003 at Bt1.70/share. MAJOR held 24.89% (422.2mn shares) in 2016 ahead of a Tender Offer (at Bt6.20/share), 26.25% in 2017, 28.09% in 2018 &amp; 2019, and 29.13% as at the 31 Dec 2020. It currently holds 647.158mn shares or 30.36%.
On the 5 July, MAJOR's board approved the entering of a MOU with Central Pattana Pub (CPN TB) in relation to its shares in SFD, at a price of Bt12/share.
An IFA was appointed to assess the sale and its opinion on the 19 July, concluded the "Transaction is reasonable with price and conditions that are fair".
A SPA was entered into yesterday with an expected completion on the 30 August. 
In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company. 
Therefore CPN is required to make a tender offer for the remaining shares in SFD at the same price of Bt12/each upon the completion of the SPA.  A mandatory tender offer must be unconditional. 
SFD shares gained ~40% in the month prior to the 5 July announcement, on evident news leakage. Bt12/share is also a lifetime high. I would not be surprised if the tender offer leads to a subsequent delisting offer from CPN.
More below the fold.


Siam Future Development (SF TB): Central Pattana MGO As MAJOR Cineplex Exits

<p><strong>We maintain HOLD rating with new 1H23E target price at Bt19.80/share, from Bt25.50/share (-22%), derived from 19.9x PE’1H23E, which is its 5-year trading average.</strong></p><div>• MAJOR had net losses in 2Q21 at B218m, better than net losses of Bt475m in 2Q20 but worse than net losses of Bt120m in 1Q21.</div><div></div><div>• Well expenses control buoyed overall performance from Covid lockdown.</div><div></div><div>• The losses should still incur in 3Q21 given the lockdown situation before recover in 4Q21 on the expectation of cinemas reopening</div><div></div><div>• MAJOR will diversify business to content creator, serving to streaming platform.</div><div></div><div>• We revised down 2021E recurring earnings to losses and cut net profit forecast in 22-23E by 33% and 17%, respectively</div>

We maintain HOLD rating with new 1H23E target price at Bt19.80/share, from Bt25.50/share (-22%), derived from 19.9x PE’1H23E, which is its 5-year trading average.• MAJOR had net losses in 2Q21 at B218m, better than net losses of Bt475m in 2Q20 but worse than net losses of Bt120m in 1Q21.• Well expenses control buoyed overall performance from Covid lockdown.• The losses should still incur in 3Q21 given the lockdown situation before recover in 4Q21 on the expectation of cinemas reopening• MAJOR will diversify business to content creator, serving to streaming platform.• We revised down 2021E recurring earnings to losses and cut net profit forecast in 22-23E by 33% and 17%, respectively

<p><strong>Yesterday MAJOR noticed to SET about an approving of the sale of its 30.36% share in Siam Future Development PCL (SF) to o Central Pattana PCL (CPN) for Bt7.77bn.</strong></p><div>• The company would book Bt2.8bn extra gain from the transaction.</div><div></div><div>• The cash from the transaction would be used for debt repayment of Bt5.3bn, business expansion of Bt265m, and working capital of Bt2.2bn.</div><div></div><div>• The debt repayment will lean its gearing and save Bt159m interest expenses annually, which would mostly match a sacrifice of equity income from SF.</div><div>
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</div><p><strong>We downgrade our recommendation to HOLD rating, from BUY, with unchanged target price at Bt25.50/share, derived from 3.5x PBV’21E, which is its 5-year trading average and near pre-covid level at 3.6x. The stock increased 22% since our upgrade last month, on the expectation to be prime beneficiary from Covid ease. However, the situation seems worsen thus the recovery should be delayed.</strong></p>

Yesterday MAJOR noticed to SET about an approving of the sale of its 30.36% share in Siam Future Development PCL (SF) to o Central Pattana PCL (CPN) for Bt7.77bn.• The company would book Bt2.8bn extra gain from the transaction.• The cash from the transaction would be used for debt repayment of Bt5.3bn, business expansion of Bt265m, and working capital of Bt2.2bn.• The debt repayment will lean its gearing and save Bt159m interest expenses annually, which would mostly match a sacrifice of equity income from SF.
 
We downgrade our recommendation to HOLD rating, from BUY, with unchanged target price at Bt25.50/share, derived from 3.5x PBV’21E, which is its 5-year trading average and near pre-covid level at 3.6x. The stock increased 22% since our upgrade last month, on the expectation to be prime beneficiary from Covid ease. However, the situation seems worsen thus the recovery should be delayed.

MAJOR: Sell 30% Investment in SF for Bt7.8bn

Thailand

Major Cineplex Group Public Company Limited operates movie theater chain under Major Cineplex name, and bowling alley chain under Major Bowl name. The Company also provides theater advertising services and concession stand rentals in its movie and bowling complexes.

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Major Cineplex Group (MAJOR TB)

MAJOR: Expect EBITDA to Turn Positive from 4Q21 and Onward to 2022

We expect the company’s operating performance to improve gradually from the bottom in 3Q21 as there are number of quality movies to be released...

Pi Securities PCL, Thailand

Buy Siam Future Development (SF TB). Then Buy Some More

Buy Siam Future. Then buy some more. I think you're looking at a minimum 10% upside from here - if using Big C Supercenter's delisting example -...

David Blennerhassett

Siam Future Development (SF TB): Central Pattana MGO As MAJOR Cineplex Exits

This is a done deal. Just a question of timing. At Bt11.70/share, you're looking at a gross/annualised spread of 20.6%/10.9%, assuming late...

David Blennerhassett

MAJOR: Taking Longer to Recover

We maintain HOLD rating with new 1H23E target price at Bt19.80/share, from Bt25.50/share (-22%), derived from 19.9x PE’1H23E, which is its 5-year...

Pi Securities PCL, Thailand

MAJOR: Sell 30% Investment in SF for Bt7.8bn

Yesterday MAJOR noticed to SET about an approving of the sale of its 30.36% share in Siam Future Development PCL (SF) to o Central Pattana PCL...

Pi Securities PCL, Thailand

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