IMAX's Africa Opportunity Could Be Enormous

In a report issued Thursday, Macquarie analyst Matthew Brooks takes a look at IMAX Corporation (USA) IMAX’s opportunities in Africa, and reiterates an Outperform rating and $46 price target on the stock, which implies a 7.1 percent potential upside over the next 12 months.
Quantifying The African Lions Opportunity
The firm tried to quantify the potential amount of IMAX theatres that could be installed in Africa, following IMAX’s first theatre partnership in Nigeria, announce on Thursday.

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The analysts highlight three key points to their investment thesis:

• Africa has a rapidly expanding middle class. UN data suggests Nigeria will have the third largest urban population by 2050, only trailing China and India. Moreover, the continent’s urban population is expected to grow 4.3 percent per year through 2050, much faster than Asia’s 1.8 percent a year. People moving to cities imply higher income and consumption rates. “As middle class consumption patterns are similar in a globalized world, we see Africa’s box office growing at mid-to-high single digits,” the experts conclude.
• IMAX’s zone target in Africa stands at 18, which implies 49 million urban people per IMAX theatre by 2030 (Latin America is just 3.3 million). However, they already count with 5 zones in South Africa and sign-ups in Angola and Nigeria, so the target looks quite conservative.
• Macquarie analysts believe IMAX could install 200 theatres in Africa, based on figures of Asia ex-China and Latin America.