Broker’s cautious outlook on Aussie B.O.
Australian box office receipts in the past few months were 9% below the same period last year- and at least one broker isn’t optimistic about the release schedule through the end of 2013.
Ord Minnett analyst Nicholas McGarrigle said in a briefing note to clients he expects the strongest upcoming performers to be Thor: The Dark World (which opens October 31), The Hunger Games: Catching Fire (November 21), Anchorman: The Legend Continues (December 19) and The Hobbit: The Desolation of Smaug (December 26).
But he observed, “The risk is that these films do not match the impressive performance of (prior year) titles [including] Skyfall, which was the seventh highest grossing film in Australian history.”
McGarrigle estimates industry-wide grosses in the first 15 weeks of the current financial year were 9% below the same period in 2012, which in turn were 8% below 2011. He said the B.O. staged an impressive comeback in the second half of the 2013 financial year to finish the year flat but opined, “We remain wary of the upcoming schedule’s ability to do the same.”
His outlook may be unduly pessimistic given the earnings potential of other titles he listed including Bad Grandpa (which got lots of laughs at the Australian International Movie Convention on Wednesday), The Counselor, Cloudy 2: Revenge of the Leftovers, Saving Mr Banks, Frozen, The Secret Life of Walter Mitty, The Wolf of Wall Street and The Railway Man.
The broker said Village Roadshow Pictures' films and the Warner Bros titles distributed by Roadshow Films tend not to be as profitable per dollar of box office as titles acquired from independent studios such as Lionsgate and The Weinstein Co. due to a flat fee versus box office participation respectively.
Surveying Village Roadshow Ltd.’s exhibition business, he said he assumes “minimal top line growth” this fiscal year with growth “driven by food and beverage sales and a small recovery in box office.”
He noted VRL has flagged a softer result for the distribution division due to the renegotiation of fees paid by Foxtel Movies and the sale of its distribution centre. But he’s bullish about its digital distribution business which, he believes, is starting to “to more than offset the decline in the traditional DVD distribution business.”
The broker has a buy recommendation on VRL stock.