CJ CGV rides high on overseas success

By Lee Hyo-sik

CJ CGV shares closed sharply higher on Monday after positive reports from brokerage houses that believe the country’s largest cinema chain will perform strongly on growing overseas ventures.

The release of blockbuster movies such as “The Avengers: Age of Ultron” at home and abroad have also helped lift the bottom line, analysts say.

They believe the share price will continue to rise.

Korea Investment & Securities Monday issued a “buy” for the shares, raising the target price to 100,000 won from 86,000 won.

CJ CGV hit a daily limit high of 14.95 percent, closing at 93,800 won on Monday. The benchmark KOSPI closed up 0.71 percent at 2,100.42.

“In the first three months of the year, the company performed stronger than initially expected on the back of its strong business in China and other Asian countries,” said analyst Jeong Hee-seok of Korea Investment & Securities. “China’s movie industry grew 42 percent in the first quarter from a year earlier, but CJ CGV sales soared 60 percent in the world’s fastest-growing economy.”

From January to March, the cinema chain posted 257.5 billion won revenue, up 4.3 percent from the same quarter in 2014. Operating profit surged 51 percent to 14.5 billion won.

Jeong said CJ CGV’s business in China and other Asian nations would continue to expand at a robust pace, providing an upward momentum to its stock.

CJ CGV has capitalized on “hallyu,” the Korean cultural wave sweeping the globe.

After opening its first overseas cinema in China in 2006, the company now operates 45 theaters on the mainland, drawing tens of thousands of Chinese moviegoers every day.

CJ CGV, which has 127 theaters in Korea, also has 24 cinemas in Vietnam, 12 in Indonesia and four in Myanmar. It has also operated a cinema in Los Angeles since 2010.

In addition, the release of box office hits such as “Fast and Furious 7” and The Avengers have helped boost the company’s performance. CJ CGV is widely expected to post stronger financial results in the second quarter.

“The success of Hollywood movies this year has enabled CJ cinemas to attract more moviegoers in Korea, China and other Asian countries,” said IBK Investment & Securities analyst Lee Seon-ae.

“Blockbuster movies also helped CJ draw more people to its 3D and 4D screens, for which people pay more than those watching conventional 2D films. This has further improved the bottom line.”

IBK raised its outlook for CJ, projecting the stock will go as high as 104,000 won, up from an initial target price of 89,000 won. Daishin Securities, KDB Daewoo Securities and other brokerages have also issued a higher target price.

Lee said the upcoming release of The Avengers in China, Vietnam and other Asian nations would boost CJ’s performance, adding that its China business would become profitable in the second quarter.

“The company’s operating loss in China fell to 1.1 billion won in the first quarter from 5 billion won a year earlier,” the analyst said. “We expect its China operation will generate profits in the second quarter and its business in other Asian countries will improve drastically.”

CJ CGV said it would continue to expand overseas in the coming years, stressing that its cinemas has become a popular franchise across Asia.

“We will continue to open more theaters in China and other Asian countries,” a spokeswoman said. “We will focus more on attracting more moviegoers to our 4DX and Screen X theaters, which enable a movie presentation to be augmented with environmental effects such as motion, odor and humidity.”