Whenever market conditions become challenging, consolidation takes place, especially in the current environment one year after the Covid-19 pandemic wreaked havoc on the economy and business community.
The value of an asset will emerge when it is pressed to an attractive level — most of the time below the market price. That is why it is not surprising to see ailing and non-performing assets come under a forced sale.
The recent move by PPB Group Bhd’s Golden Screen Cinemas to acquire the majority of cinema assets from the operators of MBO Cinemas at an undisclosed sum is one of the signs of a consolidating market.
The cinema segment has been hard hit in this health and economic crisis. Cinemas were forced to shut after the first Movement Control Order (MCO) came into force last year. Although they were allowed to reopen last July, the Malaysian Association of Film Exhibitors decided to temporarily suspend cinema operations from last November after the reimposition of the conditional MCO in certain states to curb a new wave of infections.
MBO — the country’s third-largest cinema chain in Malaysia after GSC and TGV — went into voluntary liquidation, owing to cash-flow constraints.
Meanwhile, PPB’s film exhibition and distribution segment incurred a loss of RM136 million last year against a profit of RM67 million in 2019. While cinemas have just reopened, the operating environment is expected to remain challenging, with the group foreseeing a recovery for the segment only in the second half of this year.
In 2016, it was reported that PPB Group had received bids for GSC for a value of more than RM2 billion, but the conglomerate had no intention to sell its film exhibition and distribution segment.
Fast forward to today, it has become more ambitious with the acquisition of MBO Cinemas, which could further cement its position in the entertainment industry.