IMAX Poised for Consistent Profitability and International Growth, Analysts Maintain Positive Outlook with Upside Potential

Imax Corp IMAX disclosed a proposal to acquire 96.3 million shares in its Hong Kong-listed subsidiary, IMAX China, for around HK$10 per share in cash ($124 million).

The offer represents around 49% premium. The deal will likely unlock annual public company cost savings of around $2 million and tax efficiencies. 

Benchmark analyst Mike Hickey reiterates Imax with a Buy and a $23 price target. The analyst believes a successful deal would add an incremental $1 to his FY24 price target.

Hickey estimated revenues increased 13% to $84 million (consensus: $89 million), and estimated adjusted EBITDA increased 16% to $29 million (consensus: $31 million). He calculates the adjusted EBITDA attribution margin of 38% 39. 

Imax's film pipeline includes Indiana Jones, Mission Impossible, Oppenheimer, Gran Turismo, Blue Bettle, Exorcist (Untitled), Dune, Wonka, and Aquaman. China has approved Hollywood films, eliminated the blackout window, and a tax holiday from May to October.

IMAX expects to drive significant growth in IMAX systems signings, installations, global box office, and adjusted EBITDA in FY23, including international box office of $1.1 billion (vs. $1.1 billion in FY19 and $0.9 billion in FY22), between 110 – 130 IMAX system installations worldwide (vs. 92 in FY22), and adjusted EBITDA in the mid 30% margin range

Wedbush analyst Alicia Reese reiterates Imax with an Outperform and a $26 price target.

IMAX remains on Wedbush's Best Ideas List, given Reese's view that it is the best way to play the theatrical rebound in 2023 as it gains market share.

Imax's global screen count will continue expanding in the coming years.

China's rebound is projected to continue throughout the year, supported by Imax's proposed acquisition of its remaining shares in IMAX China.

Moviegoers' preference for premium screens and the IMAX brand will likely increase Imax's market share.

Imax has significant room for screen growth in Asia, EMEA, and LatAm.

With Imax's significant global footprint growth potential and market share gains on its growing base of joint-venture screens, the analyst finds IMAX shares as currently undervalued.

Imax is the best positioned to gain from consumers' shifting toward premium screens. The analyst anticipates a 200 – 300 basis point improvement in EBITDA margins post-acquisition.

Rosenblatt analyst Steve Frankel reiterates Imax with a Buy and a $27 price target.

Price Action: IMAX shares traded higher by 5.68% at $18.05 on the last check Thursday.

Photo via Wikimedia Commons

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