Indonesia’s largest movie chain, Cinema XXI, will become a publicly listed company this week. The IPO is looking to raise around IDR 2.4 trillion ($159 million) by floating 10 percent of the company’s stock to public shareholders. The other 90 percent will remain in the hands of PT Harkatjaya Bumipersada and PT Adi Pratama Nusantara. These are the holding companies controlled by Cinema XXI co-founders Benny Suherman and Harris Lasmana.
Salween Investment Private Limited, an investment vehicle for one of Singapore’s state-owned investment funds GIC, also has a call option which if exercised will give them a 22.5 percent stake. Funds raised from the offering will be used for continued expansion and to pay down a working capital loan that was taken out last year.
This IPO reflects the confluence of a couple of different trends in Indonesia. One, as I have previously discussed, is that Indonesia’s domestic capital markets have experienced rapid growth in recent years. The Indonesia Stock Exchange has been around since the 1970s, but there are a lot more companies actually listing on it these days and raising significant amounts of capital. This is a good thing for the economy (assuming it is done carefully and with proper regulatory oversight).
This particular IPO also points to the growth of Indonesia’s consumer class and their rising spending power. For most people, movies are what you would consider a want rather than a need. You spend your money on a movie ticket and expensive popcorn when all your other bills are paid, and you have disposable income to spare. When demand for movie tickets increases, it is one sign of a growing middle class that has more disposable income.
And in Indonesia, the movie business has seen strong recent growth (pandemic years excluded, obviously). This includes demand for foreign imports like Marvel and Fast and Furious films, but there has also been a very solid appetite for domestically produced features catering to the tastes of local audiences. Horror films featuring local ghosts and ghouls, for instance, have been reliable winners at the Indonesian box office. 2022 set a record with over 54 million ticket sales for domestic films.
All of this has been good news for Indonesia’s theatrical exhibitors. Cinema XXI, which is the largest and has been around since the Suharto era, has seen explosive growth over the last decade. According to the investor prospectus, Cinema XXI had 129 movie theater locations in 2012. By last year that had increased to 225, with over 1,200 screens and about 55 percent of the film exhibition market.
This is reflected in the company’s financials. In 2019, the last full year before the pandemic throttled the film industry, Cinema XXI booked IDR 6.9 trillion in revenue, or about $457 million. In 2022, the movie chain returned to profitability on IDR 4.4 trillion or $292 million in revenue. While not yet a full return to pre-pandemic levels, these are clear signs of a recovery. So far, the 2023 box office has been a bit soft (true in Indonesia as well as the United States, where a lackluster summer release schedule has been sort of saved by the unlikely duo of Barbie and Oppenheimer).
But Cinema XXI clearly feels the market is on solid enough footing to move ahead with the IPO and continue investing in expansion. My back of the envelope math suggests the Indonesian film exhibition market is pushing toward $1 billion a year. Raising capital on the domestic stock exchange to capitalize on this growth and build more theaters in more places is good for the economy, it should be good for investors and it’s definitely good news for cinephiles.