D-Box is a buy, says Byron Capital’s Rob Goff

This morning, D-Box Technologies (TSX:DBO) announced it had signed a deal with Marcus Theatres to install twenty-nine D-Box MFX Systems in the exhibitor’s Duluth Cinema in Minnesota.

D-Box CEO, Claude McMaster, said “As one of the top 10 exhibitors in the U.S. with nearly 700 screens, this agreement with Marcus Theatres continues to support our expansion plan in North America. It reinforces our leadership in the market and helps raise the visibility of D-Box over all,”

Byron Capital analyst Rob Goff says that while this particular agreement is minor, covering only one screen, it could evolve into something much bigger. Goff says it is likely that D-Box is now solidly on the radar screen of larger theatre chains. In a research update to clients today, the Byron analyst reiterated his Speculative Buy rating and $.65 cent target on the company.

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Longueuil, Quebec based D-Box was founded in 1992, and the two-decades since have seen the company perfect its seat technology. D-Box’s MFX systems use motion effects specifically programmed for a particular film, TV series or video game, which are then sent to a motion generating system integrated within either a platform or a seat. While, as late as 2009, the company struggled to build a consistent revenue stream, things improved when management decided to dedicate itself to the commercial theatre market. Although D-Box is still losing money, revenue is improving. The company’s fiscal 2012 revenue, reported on June 21st, was $8.8-million, up from 2011’s $6.68-million.

Goff says D-Box has managed to insert itself into the conversation with large exhibitor chains by demonstrating it can work in smaller situations, which are effectively acting as test markets. He points out that the company’s film lineup includes some of the biggest hits this year, including The Avengers, The Hunger Games, and the upcoming The Amazing Spider-Man. Goff says delivering on successful titles like these mean D-Box is demonstrating attractive economics in small rollouts, which he thinks will naturally lead to larger ones.

At press time,shares of D-Box Technologies closed up 5.4% to $.295 cents.

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