Magna Pacific - News !!!!!!!! - 500 Beiträge pro Seite

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FRIDAY, APRIL 12, 2002, 5:10PM
This market report is provided in good faith from sources believed to be accurate and reliable. OzEquities
directors and employees do not accept liability for the results of any action taken on the basis of the
information provided or for any errors or omissions contained therein. 1
OZEQUITIES NEWSLETTER
Australia’s most comprehensive daily digest of equity news
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FEATURE
Week`s Special
MAGNA PACIFIC: A PROFITABLE DOWN TO EARTH PURVEYOR OF DREAMS
By Jenny Prabhu and Gerald Stanley
Tel. [phone]
Fax [phone]
[e-mail]
OzEquities
Locked Bag No 30.
Werribee 3030 OZEQUITIES NEWSLETTER
FRIDAY, APRIL 12, 2002, 5:10PM
This market report is provided in good faith from sources believed to be accurate and reliable. OzEquities
directors and employees do not accept liability for the results of any action taken on the basis of the
information provided or for any errors or omissions contained therein. 2
Magna Pacific, which listed in the shell of
AlertCom in 1991 headed by Allan Radley since
before listing, has been profitable for the last
four consecutive years, it has no borrowings,
about $5m in cash, an excellent balance sheet -
and maintains a very low profile although it is
Australia`s largest independent distributor of
film, DVD and video with 3000 movie titles and
the largest documentary library in Australia -
distributing to the retail and wholesale market,
TV and cinema industries.
It is a bulk manufacturer at its Brisbane facility
with a vertically integrated, highly efficient
computerised operation. The factory normally
works 24 hours, 5 days a week and extends to
7days a week in busy periods. Magna prides
itself on having a title on the shelves of a
customer within 48 hours of receiving the order.
Involved in the most creative industry on earth -
with its marketing strategy involving all manner
of merchandise installed at outlets to promote
video products from fantasy to documentary -
Magna Pacific takes a hard headed approach.
If a new release succeeds in the US, with box
office takings of $US40 million plus, MPH
reckons it`s going to make about 14% of that in
Australia. Films that turn out to be dogs in the
US will make about 2% of US takings and are to
be avoided. MPH is partial to middle of the
range long life movies - like Enigma.
MPH`s marketing strategy is to promote the
products it manufactures and distributes (eg
Dungeons and Dragons, Four Weddings and a
Funeral etc) but not its own brand name.
Meanwhile, it`s margin on DVD products is
currently some 40% plus. The DVD market
together with the Becker joint ventures are
expected to be the growth engines over the next
few years, with earnings expected to start
growing strongly by June 2003.
It is not beyond reason to expect that at some
stage in the future, the two companies may come
closer or merge - MPH has 8.2% of Becker
Group.
MPH is looking at launching in the UK at some
time in the future - after the company reaches
$30/50m in turnover with the appropriate
management depth, say within the next 3/5
years.
With expectations that earnings from around
June 2003 next year will see a significant
acceleration, Allan Radley was on a roadshow in
Melbourne this week.
What the analysts say
Between July and September last year, Bell
Securities, DJ Carmichael and Hogan Partners
each put out a "spec buy" recommendation on
Magna Pacific.
Even though the profit result was a
disappointment (anticipated by Bell Securities,
and reported on by DJ and Hogan Partners) due
to a greater than expected impact on profitability
because of the weakening of the Aussie dollar,
the analysts each saw the potential of huge
growth in the DVD market - as the format
replaces VCR and affordable DVD players
become more widely available - since people
will replace their VCR libraries with DVD`s.
MAGNA PACIFIC - A SNAPSHOT
The business
Magna Pacific is a mass producer and marketer
of pre recorded movies on DVD and VHS,
distributed in Australia and NZ via cinemas,
rental outlets, free to air and pay TV and to
retail clients.
It is headquartered in Brisbane where a 2300 sq
metre manufacturing and distribution facility is
located 10 minutes from the Brisbane airport.
The plant operates 24 hours a day, 5 days a
week, making one million videos and packaging
350,000 DVDs a year. The raw materials are
imported from Asia and orders are shipped
within 48 hours. Blank video tapes in excess of
requirements are sold into the blank tape
market.
Unit sales of MPH`s library of movies,
documentaries and childrens titles average
around 900,000 a year.
It has some 3000 movie titles and the largest
documentary library in Australia.
Titles include Dances with Wolves, Dungeons &
Dragons, Wonder Boys, Four Weddings and a
Funeral, Primary Colors, The Civil War and
The West.
Typically the rights to feature movies are
acquired for a period of 20 years. By the end of
Fiscal 2005 MPH will own the rights to in
excess of 50 feature movies with incremental
and ongoing sales of DVD`s and resale of
television rights for the term of each contract.
Profits on DVDs are more or less unaffected by
currency fluctuations and the market is expected
FRIDAY, APRIL 12, 2002, 5:10PM
This market report is provided in good faith from sources believed to be accurate and reliable. OzEquities
directors and employees do not accept liability for the results of any action taken on the basis of the
information provided or for any errors or omissions contained therein. 3
to increase strongly, from around $100 million
now to $500 million in the next 4/5 years - or
from 1m families with DVDs now to around
5/6m, in line with the current VHS ownership,
in the next few years.
The profit margin currently is 40% plus on
DVD`s although this is expected to reduce.
Magna makes VHS videos for around $2 each,
half the cost of manufacture for the majors in
the industry.
The supply system is automated on EDI -
supplied to some 6000 outlets weekly, or
fortnightly store by store and product by product.
The focus is on low risk products
Magna does not acquire any product for
Australia until it has seen the box office
performance in the US.
A movie that grosses some $40/50m in the US
can be expected to gross about 14% of that in
Australia in $A terms.
Dogs in the US may gross about 2% in
Australia.
Eg: Dungeons & Dragons grossed $US15m in
the box office in the US. This was released in
November, 20,000 units had been shipped by
last Christmas.
A Walk to Remember grossed $40 million in the
US - it has been acquired via a distribution
agreement.
Australian films are acquired after their
performance in the home market has been
gauged.
Magna`s libraries and titles are actively
managed. When sales slow down, a title is
pulled. Magna plans to buy 18 cinema release
movies in 2002-03. It does not intend to ever be
involved in producing movies, given its focus on
low risk.
Earnings mix
Magna makes some 20% of its earnings from
cinema products, 50% from retail outlets for
videos and DVD`s such as the large department
stores, and 30% from rental specialists such as
Blockbuster.
Currently some 95% is earned in Australia and
5% in New Zealand.
The Becker joint ventures
The first joint venture was formed in 1999,
Magna Pacific Pty Ltd, which is now owned
50% by MPH, 50% by Becker Group.
Early last year Becker Magna Films Pty Ltd was
formed as a 50/50 joint venture.
Magna Pacific Pty Ltd has the rights for rental
and sale of all the Becker Group`s exclusive
cinema releases. It has access to Becker`s Dendy
Cinemas which includes the East Circular Quay
complex in Sydney as well as Becker`s 50% of
Cream Media in Asia.
In November last the joint venture signed an
exclusive contract with Discovery
Communications Inc to distribute the Discovery
Channel branded home videos and DVD`s in
Australia and NZ. The addition of these titles is
budgeted to increase sales by in excess of
$500,000 in the first year increasing to in excess
of $1.5m in the second year.
Total sales of the Discovery Channel branded
home videos and DVD`s are forecast to exceed
$7m over the life of the contract, increasing
gross profit by in excess of $4m over the term of
the contract.
Last July Magna Pacific formed a joint venture
with Stage Door Video NZ to form Magna
Pacific NZ, owned 51% by Magna Pacific Pty
Ltd, to distribute Magna`s and Stage Door`s
existing catalogues of VHS and DVD titles to
the New Zealand market. Stage Door currently
enjoys upwards of a 10% market share in Video
Sell Through in NZ.
Magna Pacific has 100% of RocVale
Entertainment, acquired in 1998. RocVale
Entertainment is Australia`s oldest video
distributor, established in 1989.
Marketing
Magna Pacific spends around 10% of gross
revenue on marketing, focussed on key theatrical
titles.
The Sales and Marketing division headed by
general manager Phil Maddison markets to the
two major outlets - the trade and the retail
consumer.
Mailouts to the retail and rental customer base
pre selling the film (including preview tapes of
the film, artwork, merchandise etc) is
undertaken.
Sales collateral is developed and distributed for
in store display purposes, advertising campaigns
aimed at the trade are undertaken through trade
journals and trade website publications.
FRIDAY, APRIL 12, 2002, 5:10PM
This market report is provided in good faith from sources believed to be accurate and reliable. OzEquities
directors and employees do not accept liability for the results of any action taken on the basis of the
information provided or for any errors or omissions contained therein. 4
Advertising campaigns are aimed at the
consumer - using all mediums - TV, radio, the
print media and out of home advertising.
Magna seeks to develop strong PR and Press
reviews for titles in all key publications, it cross
sells Magna properties with key partners and via
other Magna films, and cooperatively promotes
products through retail and rental partners in
house magazines and catalogues.
The competition
Magna Pacific sees its competition as the global
majors - Universal, Warner Brothers, Roadshow,
Fox, Colombia. It is by far the largest bulk
manufacturer and distributor of videos for the
DVD and VHS markets in Australia.
*Southern Star, which had acquired PMP`s
video duplication, CD and DVD manufacturing
operations Pacific Mirror Image for $28m in
cash in August 2000, has recently onsold the
business for $50 million initially, more to follow
in June for the sale of Duplitek to Technicolor of
the US this week.
*Beyond International is a maker of films and
TV products as well as a distributor.
Magna Pacific Financials
Last Traded price 34 Cents
Shares Issued 50.6m
Options Issued 50.4m Expiring Feb 2004. Exercisable at 32 cents. Trading at 7.5 cents
Market Cap $21.0m
Year ended June 30, Values in Millions$
INCOME 2002 Int 2001 2000 1999
Op Revenue 6.9 11.6 9.6 6.1
Op Profit 0.6 0.8 1.6 0.3
Net profit 0.4 1.0 1.1 0.4
EPS (Cents) 0.7 1.9 2.37 1.85
Dividend (Cents) Nil 1.00 1.00 Nil
PE Ratio (times) 24.3 17.9 14.3 18.4
Company`s Projections. For 2002 and 2003
Values in Millions
Projections 2002 2003
Revenue 15 21
NPBT 1.8 2,1
EPS (cents) 2.5 4.2
DPS (cents) 1.5 2.0
PER (times) 13.6 8.1
The company`s forecast warning
Some earnings from films purchased in the 4th quarter may tip over into 2003/04 year.
FRIDAY, APRIL 12, 2002, 5:10PM
This market report is provided in good faith from sources believed to be accurate and reliable. OzEquities
directors and employees do not accept liability for the results of any action taken on the basis of the
information provided or for any errors or omissions contained therein. 5
BALANCE SHEET 2002 Int 2001 2000 1999
Current Assets 12.1 13.7 12.6 5.9
Non Current Assets.. 11.1 9.0 7.9 2.4
Current Liabilities 1.9 2.5 3.8 0.6
Non Current Liabilities 2.5 1.9 0.2 0.0
Net Assets & Shareholders` Funds 18.8 18.3 16.5 7.7
Intangibles 0.5 0.5 0.6 0.9
Net Tangible Assets 18.3 17.8 15.9 6.8
Outside Equity 3.2 3.1 3.1 nil
Net Tangible Assets 15.1 14.7 12.8 6.8
Gearing (Net of Cash) % Nil Nil Nil Nil
NTA per share (cents) 29.9 29.2 25.3 20.7
Shares Issued (Millions) 50.4 50.4 50.5 32.8
Cash Flows: 2002 Int 2001 2000 1999
Cash on hand (at open) 6.7 6.8 3.4 0.5
Operating Activities 0.6 1.0 0.6
Investing (1.1) (2.0) (0.2)
Financing Activates (0.5) 0.9 2.8 3.1
Cash on hand at Year end 5.7 6.7 6.8 3.4
OUR NOTES
1/While rising annual returns from growing film libraries are expected, internet broadband has the ability
to provide movies on demand at any time which could provide strong competition. However, Magna is
acquiring internet rights for all feature films.
Directors:
Clive McKee, chair
Allan Radley, managing director
John Russo non exec director
Mrs G J Vasyli company secretary (Allan Radley`s sister)
Major shareholders:
ANZ Nominees with 72.52% - held by a number of individual retail investors in Germany.
Allan Radley and his sister together about 7%
John Russo (Roxtel) has 4.27%
Becker - MPH`s joint venture partner
MPH`s holding in Becker Group is expected to be lifted to 17/19.9% in due course. Becker, which has
cinema investments in addition to film production and distribution is trading at a discount to NTA.
FRIDAY, APRIL 12, 2002, 5:10PM
This market report is provided in good faith from sources believed to be accurate and reliable. OzEquities
directors and employees do not accept liability for the results of any action taken on the basis of the
information provided or for any errors or omissions contained therein. 6
Becker Financials
Mid of Bid and Offer price 17.5 cents
Shares Issued 72.4m
Market Cap $12.7m
Year ended June 30, Values in Millions$
INCOME 2002 Int 2001 2000
Op Revenue 11.7 40.5 53.3
Op Profit 0.2 0.6 (9.8)
Net profit 0.2 0.6 (9.8)
EPS (Cents) 0.35 0.91 na
PE Ratio (times) 25 19.2 na
BALANCE SHEET 2002 Int 2001 2000
Current Assets 22.3 22.3 23.9
Non Current Assets.. 37.5 22.1 19.7
Current Liabilities 18.7 13.6 13.0
Non Current Liabilities 22.1 12.2 12.6
Net Assets & Shareholders` Funds 19.0 18.6 18.0
Intangibles 2.0 1.1 1.1
Net Tangible Assets 17.0 17.5 16.9
Gearing (Net of Cash) % 50.1 19.6 21.1
NTA per share (cents) 23.7 24.9 24.0
Shares Issued (Millions) 71.7 70.4 70.4
Cash Flows: 2002 Int 2001 2000
Cash on hand (at open) 2.4 1.6 1.6
Operating Activities 4.6 3.4 2.5
Investing (20.0) (2.3) (0.8)
Financing Activates 13.8 (0.3) (1.7)
Cash on hand at Year end 0.8 2.4 1.6
OUR NOTES
1/The market is expecting a share issue to reduce debt.
2/Operating revenue has fallen year on year despite an increase in investments.
3/Assets are not turning an effective yield with the consequence that the shares are trading at a discount to
NTA per share.
ends

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