D-Box deal with Cinemark gets thumbs up at Euro Pacific

A strong finish to the year has Euro Pacific Canada analyst Rob Goff feeling expansive about the possibilities for Quebec-based D-Box Technologies (D-Box Technologies Stock Quote, Chart, News: TSX:DBO).

Yesterday, D-Box announced it had U.S.-based exhibitor Cinemark had committed to install to installing D-Box’s motion systems in at least 80 new screens in 40 theatres over the next 24 months.

Under the terms of the agreement, Cinemark will receive two million common share purchase warrants to Cinemark, with each warrant entitling the holder thereof to acquire one Class A common share of D-Box at a price corresponding to the volume-weighted average price of the Class A common shares of D-Box on the Toronto Stock Exchange for the five trading days prior to the exercise date of the warrants.

“We are very pleased to receive another strong endorsement from Cinemark, a leading world-class exhibitor,” said CEO Claude McMaster. “They have been staunch supporters of ours and lead the way for exhibitors looking to offer a unique and immersive experience that is straightforward to deploy in any theatre around the world.”

Goff, who does not have a rating or target price on D-Box, says the company’s market leadership and critical scale in motion controlled seats give it a natural entry into the world of virtual reality, both in theatres and for consumers.

“We are bullish on the adoption of motion control capabilities across both home and commercial theatre deployments,” says Goff. “We see theatre IRRs at 30%+ driving deployments while the expanding scale of theatres builds studio economics where in-theatre economics can boost studio profits by 15-20%+. We believe virtual reality (VR) based gaming and entertainment applications will in turn drive commercial and residential demand for integrated motion controlled capabilities where in-home adoption of streaming and OTTP providers offers new platform capabilities for D-BOX’s streaming and OTTP friendly delivery. Furthermore, VR paired with motion control has the potential to displace existing large budget training simulators while developing new entertainment applications.”