Imax Has Balance Sheet "Muscle" as China Aims to Reopen Cinemas, Analyst Says

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Eric Handler of MKM Partners forecasts that the exhibitor's screens in the country could reopen by mid-May.

As China's exhibition sector — shuttered since Jan. 23 amid the coronavirus pandemic — gets set to turn its lights back on, analyst Eric Handler of MKM Partners on Wednesday said Imax has "multiple years of liquidity" on hand with which to start reopening its screens in China in mid-May.

A small number of Chinese cinemas reopened in March as that country made progress in battling the COVID-19 crisis, but then shut down again soon afterward. But Handler sees Imax as being one of the first global exhibition players to be back in business as schools in China get set to reopen in late April, likely allowing movie theaters to resume operations in mid-May.

"We continue to favor Imax among the exhibition related companies. This view is based on the strength of its balance sheet, its high level of liquidity and our expectation it will be the first of the companies to be back in business given its presence in China," the analyst said in an April 15 investors note.

Imax isn't commenting directly on the Wall Street forecast, but a mid-May restart in film screenings in China is understood to be a realistic target ahead of a wider reopening later this summer. Schools in Shanghai and Beijing are scheduled to open in late April or early May, and theater operators are expected to follow shortly afterwards as they get back in business.

And Imax has always seen its own screens resuming operation as the wider Chinese exhibition sector and its 70,000 screens return to normal operation. Chinese theaters are expected to restart film screenings with library titles to get local moviegoers, long cooped up in their homes, back into the multiplex-going habit.

And Hollywood releases from earlier in 2020 like 1917, Bad Boys for Life and Bloodshot may get theatrical play in China as they have been unavailable for release in that fast-growing market until now. Handler added that Imax's balance sheet has ample "muscle to flex" as exhibitors continue to burn cash amid no revenues from shuttered theaters.

"Thanks to having $110 million of cash on hand, plus access to $300 million from its revolving credit line, the company has multiple years of liquidity available for itself," the note added. The Chinese market accounts for around 40 percent of Imax's overall revenue.