Huayi Buys Jiangsu Cinema Management Stake

Chinese studio to kickstart sluggish theater-building ops

Huayi Brothers Media has paid $34.1 million (RMB210 million) for a 20% stake in theater management company Jiangsu Yao Lai Cinema Management.

The move is intended to help Huayi, China’s biggest private sector film company, manage and reinvigorate its theater activities.

Huayi currently operates 15 multiplexes in cities including Beijing, Chongqing and Hefei, giving it first half year revenues of $16.2 million (RMB101 million.) Jiangsu Yao Lai manages 12 complexes in cities including Beijing, Guangzhou, Tianjin, Xi’an, Shenyang and Kunming.

Finding, training and retaining good quality staff to manage movie theatres in China has become a major headache for many theater operators due to the astonishing speed of cinema building around the country. Some 880 complexes with 3,680 screens opened in 2012 alone, a figure higher than the entire installed base of cinema screens in Japan.

Huayi has previously said that its cinema exhibition division is to be expanded, and it earmarked funds from its IPO for building. A larger theater segment would potentially give group earnings greater stability and counterbalance lumpy earnings from film and TV production. It would also help film distribution and marketing activities.

But progress has been significantly slower than announced, as a result of the difficulty of securing good sites in the biggest cities, property price inflation and intensifying competition from rival cinemas in key locations. However, Huayi CEO Wang Zhongjun has recently said that he wants to restart the building program and reach 80 complexes within the next five years.

Analysts report that Jiangsu Yao Lai had first half operating income of $27.1 million (RMB167 million) and that they expect Huayi to increase its stake in the company, possibly to a majority position.

Huayi is not the only company seeking to accelerate its China exhibition business. In its interim results filing this week Hong Kong-listed Orange Sky Golden Harvest revealed that it now has 45 cineplexes in China with a total of 325 screens, operating at average ticket prices of $5.68 (RMB35). Based on sites secured and under construction, OSGH forecast that it will have 73 mainland China complexes in operation by the end of 2014.

Private sector market leader Wanda had 113 complexes and 980 screens in operation at the end of 2012.

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