Will China Be a Catalyst for IMAX Corporation Stock?

The theater chain sells a 20% stake in its China operations in exchange for capital to expand in the region.

Apr 26, 2014 at 8:30AM

Future IMAX Corporation (NYSE:IMAX) stock returns may depend on how well the company cashes in on the opportunities emerging in China, Fool contributor Tim Beyers says in the following video.

Recently, the theater operator struck a deal to sell a 20% stake in IMAX China to CMC Capital Partners and Chinese private equity firm FountainVest Partners for $80 million in capital, to be paid in two installments. 

Introducing Chinese ownership into the mix should also speed the path to a spinoff IPO for IMAX China, the company said in a press release. "At this juncture, it makes sense to bring in Chinese investors to help us better address local market dynamics and further optimize our business in China, including both our core theatre business as well as new business initiatives," said CEO Richard Gelfond in a statement.

Tim says the deal comes as China has been an increasingly important driver of global box-office returns. Marvel Studios films, in particular, have attracted huge audiences in the region. Iron Man 3 opened to a record $21.1 million there last year. IMAX screenings helped create the windfall, accounting for $1.5 million in grosses to set an opening-day record for Chinese cinemas.

The trend hasn't slowed in the year since. Captain America: The Winter Soldier has earned close to $100 million so far at Chinese cinemas -- a huge number earned during just 17 days of screening, according to The Hollywood Reporter.

Yet the good news doesn't end there. Domestic action flicks are also benefiting from the IMAX format. In February, kung-fu epic The Monkey King broke Iron Man 3's opening-day IMAX record with a $1.8 million haul.

Expect more records to fall. Thanks to this deal, the next round of IMAX-ready action epics should be available to even more of the Middle Kingdom. Revenue and profit should expand nicely as a result, Tim says, boosting IMAX stock in the process.

Now it's your turn to weigh in. Do you see IMAX cashing in on this deal? Or is the company overbetting on the Chinese market? Please watch the video to get the full story, and then leave a comment to let us know your take, including whether you would buy, sell, or short IMAX stock at current prices.

A stock market game you can win
The rise of streaming and alternative programming has created a $2.2 trillion disruption that three companies are poised to cash in on. You can profit right alongside them. Click here to find out how.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends and owns shares of IMAX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information