Navis Capital-backed Malaysia’s third-largest cinema operator MCAT Box Office (MBO Cinemas) Sdn Bhd is facing liquidation.
MBO Cinemas confirmed to DealStreetAsia that the company had no choice but to go through a creditors’ voluntary liquidation as it suffered a significant impact on its revenues when cinemas were shut for months under Malaysia’s Movement Control Order (MCO).
“Although the company resumed business sometime in July 2020, revenue generated from the operations was significantly impacted by strict rules on social distancing and the delay of the release of most blockbuster movies to beyond the year 2020. Therefore, the company had no choice but to go through a creditors’ voluntary liquidation,” MBO Cinemas said in its email to us.
Navis Capital owns 92.74 per cent stake in MBO Cinemas via MGO NAF VI Cinematic Holdings Ltd. Businessman Abdul Rashid Abdul Manaf owns 7.26 per cent stake in the firm.
Government-linked private equity firm Ekuiti Nasional Bhd (Ekuinas) is an indirect shareholder in the company through its investment in fund manager Navis Capital Partners’ Navis Malaysia Growth Opportunities Fund 1, L.P. Ekuinas’s indirect shareholding in MBO is less than 10 per cent.
The liquidation news was first reported by The Edge Malaysia.
“We would like to inform you that on Oct 14, 2020, the board of directors of MCAT Box Office Sdn Bhd passed resolutions placing the company in creditors’ voluntary liquidation and appointing Lim San Peen of PricewaterhouseCoopers Advisory Services Sdn Bhd as interim liquidator,” The Edge reported, citing a notice to creditors.
Responding to a DealStreetAsia query, Ekuinas said, “it is unfortunate that the COVID-19 pandemic has hurt many businesses and one of them is the cinema industry.”
“We are confident that Navis will work hard to ensure the investments under Navis Malaysia Growth Opportunities Fund 1 will navigate through the current situation and recuperate once the situation improves,” Ekuinas said in an email.
Navis Capital Partners has yet to respond to DealStreetAsia’s queries at press time.
On October 12, MBO Cinemas announced that it was temporarily closing 17 cinemas across the country until further notice. The firm operates a total of 27 cinemas across Malaysia.
It also announced the closure of five cinemas in Kuala Lumpur and Selangor state from October 14 to 27, following the Conditional Movement Control Order (CMCO) imposed by the Malaysian government to contain the spike in new confirmed cases of COVID-19.
Its cinema in Sabah, a state in East Malaysia, will be closed from October 13 to 26, its Facebook post dated October 12 showed. Only four cinemas remain open, according to the post.
Cinemas in Malaysia were allowed to resume operations as of July 1, 2020, after having been temporarily closed for more than three months since the MCO was enforced on March 18 to contain the spread of the COVID-19 pandemic.
Cinemas in certain states were forced to close again after the government imposed stricter travel restrictions as the country saw a resurgence of new cases since the end of last month.
In an interview with national news agency Bernama, MBO Cinemas chief operating officer Cheah Chun Wai said the industry suffered a 55 per cent drop in sales during the first three months of the outbreak and no sales at all during the subsequent three months.
“We are experiencing a loss of RM2 million daily, this is generally not only MBO Cinemas but all cinemas as well. So, we hope the government can address this problem and help us to recover,” he told Bernama in August.
According to data from the Companies Commission of Malaysia, MBO Cinemas posted a loss after tax of RM1.05 million ($252,794) in 2018, on the back of revenue of RM207.16 million ($49.88 million). Its profit before tax was RM713,094 ($171,688).
Between 2014 and 2018, the cinema operator has been reporting losses (after-tax) except for 2016 where it reported a profit after tax of RM368,111. As of December 31, 2018, its total assets stood at RM197.76 million while its total liabilities were at RM111.31 million.
Navis Capital’s fund undertook minority co-investments in MBO for an investment of RM21 million in 2012, according to Ekuinas’ annual report 2012.
In September 2012, Navis reportedly acquired Reliance MediaWorks Ltd’s entire stake in BIG Cinemas in Malaysia and merged the cinemas with MBO. In 2018, the Asia-focused PE was looking to exit the asset but had not found a buyer yet, The Edge reported.
It was reported in April 2012, Navis Capital bought a majority stake in MBO at a price of RM104 million ($25.03 million). The investment was done via a combination of existing shares from the current sole shareholder, Abdul Rashid, and new shares issued for a substantial capital injection from Navis.