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.
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.
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