No China fears here: U.S. funds bet big on IMAX's giant screens

Wed Oct 7, 2015 1:25pm EDT
 
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By David Randall

NEW YORK Oct 7 (Reuters) - U.S. fund managers, hoping that a bit of Hollywood magic goes a long way in China, have been rushing to invest in IMAX Corp, best known for enormous movie screens.

Prospects for growth in China, alongside upcoming releases of expected blockbusters that include new "Star Wars" films this year and next, prompted 62 funds, including Lord Abbett, Marsico, and Wells Fargo, to add shares of the company to their portfolios in their most recent quarter, according to Morningstar data.

Each firm declined to comment. Overall, there was an 88-percent jump in funds initiating a position in the stock from the quarter before.

With Chinese box office expected to overtake the U.S. market as the world's largest by 2017, IMAX is spinning off its Chinese division, which contributes approximately a quarter of its revenues. Shares of IMAX China will begin trading Thursday in Hong Kong, and IMAX will continue to own 70 percent of the public float of the Chinese division.

The upcoming installment of the Star Wars franchise, the first since Walt Disney Co purchased Lucasfilm, is expected to bring in $700 million from the U.S. box office, according to JBL Advisors. Lions Gate Entertainment Corp's final chapter of the "Hunger Games" series is expected to top $350 million, and Sony Corp's "Spectre," the newest James Bond film, is expected to garner $285 million in U.S. receipts.

Each of those films will be screened in IMAX in both the United States and in the Chinese market, which restricts imports to 34 foreign films per year. Of those, 14 must be in 3D, IMAX, or other enhanced formats.

The "robust" film pipeline is spurring Chinese theater owners to accelerate installation plans for IMAX screens, which should further boost revenues, said Benjamin Mogil, an analyst at Stifel.

IMAX has 389 screens in the United States, where per-screen revenues were up 40 percent last quarter from a year ago. IMAX China had 251 theaters at the end of June, with commitments to build another 217, its IPO prospectus showed.   Continued...