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Motion pictures are a big business and Hollywood alone clocks an average annual turnover of $11 billion. IMAX Corporation (USA) (NYSE:IMAX) was quick to recognize the potential in the business and brought in a technology which truly revolutionized the entire movie experience.
The IMAX system has its roots in EXPO ’67 in Montreal, Canada where multi-screen films are a hit. A small group of Canadian filmmakers and entrepreneurs decide to design a new system using a single, powerful projector, rather than the multiple projectors used at that time. The result: the IMAX Corporation (USA) (NYSE:IMAX) motion picture projection system, which revolutionized cinema. Over the years, IMAX continued to move along the path of innovation and brought in a resurgence of 3D technology into mainstream cinema in the late 80’s.
IMAX posted robust revenue and profits for fiscal year 2012, generating revenue of $280, which is a 21% jump from last year. IMAX realizes that in order to maintain high growth, it has to look beyond the American shores and with this clear and focused intent, it has continued to expand its footprint in the overseas market. The company identifies APAC, Europe, and Latin America as its major foreign markets.
China has been on the company’s radar for quite some time, and it is evident from the company’s annual report for the fiscal 2012, which suggests that China is its largest market outside America. In order to further penetrate the Chinese movie market, the company entered into a landmark 75 theater revenue sharing deal with China’s Wanda Cinema Line which is the firm’s largest deal outside the American market.
The introduction of the joint revenue sharing agreement has led to a significant increase in the company’s theater penetration across the globe. This has enabled the company ink deals with major filmmakers and theaters to push the IMAX experience and develop a market in new areas.
A closer analysis of the company’s financials reveals a similar mood in the market with a forward P/E (FYE 2014) pegged at 20.42 compared to current P/E of 42.55. Moreover, a PEG ratio of 0.9 vividly exhibits there is a broad consensus of future earnings growth for the company.
IMAX, with its patented revolutionary technology, operates in a space with virtually no direct competitors, as IMAX provides technology to both theater companies and filmmakers for an enhanced movie experience. However, the company faces emerging competition from North America’s largest theater group, the Regal Entertainment Group (NYSE:RGC) and Cinemark Holdings, Inc. (NYSE:CNK), which offer cinema goers an impressive experience at relatively cheaper prices.