News on another big deal has Euro Pacific Canada analyst Rob Goff feeling bullish about D-Box Technologies (D-Box Technologies Stock Quote, Chart, News: TSX:DBO).
Yesterday, D-Box announced that it had reached an agreement with Cineplex Entertainment to install D-Box motion systems into 23 additional auditoriums across Canada.
“Canadians love D-Box seats, and we’re excited to give them the opportunity to love them even more by expanding our network across the country,” said Pat Marshall, who is vice-president, communications and investor relations, at Cineplex. “Last year, premium movie experiences including D-Box accounted for nearly 40 per cent of our box office revenue, so it is clear that Canadians seek premium entertainment options when going to the movies.”
Goff says this deal is an example of continued strong execution at D-Box. He notes that the company’s largest client, Cinemark Holdings, continues to add new screens. Goff thinks D-Box’s revenue will climb from $20.6-million in fiscal 2015 to $27.9-million the following year, and then to $30.8-million in fiscal 2017.
“D-BOX has achieved market leadership and critical scale in the commercial theatre adoption of motion controlled systems with 10,054 systems (~13K including backlog) installed on 409 screens (over 551 screens have been signed) across 29 countries,” says Goff. “Throughout its expansion, D-BOX has developed longstanding studio relationships where new movie endorsements lies at its core. Over each of the past five years, D-BOX has had 10-18 encoded movies that have been top rated over their opening weekend out of 13-39 such movies annually. Theatre IRRs exceeding 30% (based on ticket premiums excluding associated incremental concession sales) ensure further adoption in new locations and 2nd screen gains. In turn, greater theatre adoption ensures greater studio support given their royalty share in D-BOX movies where in-theatre studio economics can gain 15-20%.”
In a research update to clients today, Goff maintained his “Speculative Buy” rating and one-year target price of $0.70 on D-Box Technologies, implying a return of 84.2 per cent at the time of publication.