Sony Corp SNE announced last week its own branded premium large-format theatrical system with the first screen location set to open April 1-4 during CinemaCon in Las Vegas. Instead of investing in its own new theater business, the company may be better off acquiring IMAX Corp IMAX, according to MKM Partners.
The Analyst
MKM's Eric Handler maintains a Buy rating on IMAX with an unchanged $27 price target.
The Thesis
Handler said in a note that Sony is "a bit late to the market" with the announcement of its own PLF movie auditorium and offers nothing unique or differentiated compared to the multiple competitors, including IMAX. In fact, each system comes with a "relatively steep cost" of more than $1 million so Sony will face an uphill battle in catching up against its peers.
Sony may be better off buying IMAX, which Handler said accounts for a 40 percent market share of all PLF screens at 40 percent. IMAX's technology, unlike Sony, offers a differentiated experience with its proprietary DMR film process and a unique aspect ratio which make the picture look more square than traditional rectangular theater screens.
Meanwhile, Handler said IMAX isn't getting enough credit from investors as the company offers an attractive, multi-revenue stream with high margins. The underappreciated company could realize greater shareholder value through a sale of itself with a price tag of up to $32 per share, which implies a multiple of 14 times 2019 adjusted EBITDA.
Price Action
Shares of IMAX were trading higher by 3.1 percent at $21.58 Wednesday afternoon.
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