Market Insight

Golden Screen Cinema, Malaysian largest cinema circuit, up for sale

September 22, 2016

Pablo Carrera Pablo Carrera Principal Research Analyst – Cinema, IHS Markit
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PPB Group (PPB), a Malaysian investment holding company, is reported to be looking for buyers for its film exhibition and distribution subsidiary Golden Screen Cinemas (GSC). GSC operates 306 screens in Malaysia and 39 in Vietnam and is also the owner of GSC Movies, an independent distributor in Malaysia. It enjoyed a 30% market share by number of screens in Malaysia in 2015, ahead of Tanjong Golden Village (24.8%) and MBO Cinemas (17.5%).

In H1 2016, GSC contributed a healthy 17% surge in revenue and a 36% rise in segment profit over H1 2015 figures to PPB’s consolidated results. PPB has not given details about the price tag or potential bidders.

GSC’s move is the latest in a series of recent consolidation-related news that include AMC, controlled by Chinese Wanda Group, acquiring Odeon & UCI Cinemas Group in the UK and rival Carmike Cinemas in the US, and South Korean CJV Group acquiring a controlling stake in Turkish cinema operator Mars Entertainment.

 

Our Analysis

Although it is unclear why PPB would dispose of one of the healthiest segments of the group with potential synergies with its food processing and real estate operations, GSC is up for sale and this represents an opportunity for existing and new players and may impact the regional and global landscapes.

Malaysia is forecast to grow its screen base by 5% annually on average until 2019 , the fourth fastest rate in Asia Pacific, only surpassed by Thailand’s 6.7% and China’s and Indonesia’s double digit figures. This will in turn boost the country’s level of cinema admissions, which already rose by 10% in 2015 and are estimated to continue growing at a minimum 3-4% rate over the next 5 years.

Both prospects, paired with GSC’s leading position in Malaysia, make it an interesting asset even for non-industry investors, although it is likely it will feed consolidation within the exhibition industry given the current climate.

There are two obvious suitors in China’s Wanda Group and South Korea’s CJ Group. Largely due to limited opportunities, Wanda Group has so far focused its growth in the US, Australia, New Zealand and the UK and it would be reasonable to expect further expansion in Asia, where its presence is limited to its home market of China. Incidentally, Wanda recently made a bid for Mars Entertainment in Turkey, but that circuit was ultimately acquired by CJ Group. The South Korean company has a wider footprint in the region with a presence in Vietnam (where it is the leading exhibitor and distributor), South Korea, China, Indonesia and Myanmar as well as in the US. GSC’s ownership would reinforce CJ Group’s already strong presence in Asia and consolidate its leadership in Vietnam (or at least avoid any challenge if it passed any competition law investigations). GSC’s acquisition would take any of them one step further towards becoming global players but there are likely to be other buyers in the bidding.

Locally, the identity of the buyer, or rather its financial ownership, will also matter to GSC’s competitors in the race to build new screens and increase market share in Malaysia. The likes of Tanjong Golden Village and MBO Cinemas would face a different landscape in 4-5 years if GSC were to build those new cinemas using a new parent company’s financial backing.

GSC is the leading operator in Malaysia and is also present in Vietnam. This is an opportunity to not just acquire another cinema circuit, but to strengthen the buyer’s position within the fastest growing cinema region of Asia Pacific.

Organization
Dalian Wanda
Research by Market
Media & Advertising
Category
Cinema
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