Stifel Says IMAX Investors Should Be Happy About China, U.S.

In a report published Thursday, Stifel analysts maintained a Buy rating on

, with a price target of $40, after attending investor meetings with the management. The management highlighted that the company had not witnessed any deceleration in momentum in Chinese screen growth. IMAX has a backlog of about two years on average, while the China backlog, which comprises only of new builds, is closer to 12-18 months. There are no indications of any slowdown in installation pacings. "We anticipate that the company will likely update its China TAM given the depth of the market and may very well offer new smaller zones," the analysts said. There is limited competition and Stifel expects IMAX to IPO its Chinese unit late next year of in early 2017. In the report the analysts noted, "While IMAX share of U.S. films playing in China has approached the U.S. level (slightly north of 10%), share for local Chinese movies is in the mid-single digit range. Part of this is structural, as Chinese local films air on more screens than U.S. product but part of it is that to date the quality of Chinese movies in IMAX has lagged that of U.S quality. The company is working with Chinese directors/producers for more filming with IMAX cameras, aiming to narrow that market share gap." The films this year and in 2016 seem to be "spaced well." The company indicated that the appeal of an IMAX slot has encouraged the studios for improved spacing between blockbusters. The revenue estimates for 2015 and 2016 have been reduced from $355.2 million to $348.5 million and from $384.0 million to $379.9 million, respectively. The EPS estimate for 1Q05 has been reduced from $0.07 to $0.04.