Japan's movie king Toho nears new high as Cineworld shutters

[TOKYO] While global cinemas are reeling from the coronavirus and delays to Dune and the latest James Bond release, shares of Japan's biggest movie company are climbing back towards a record high as the world's third-largest movie market slowly returns to normal.

Japan has weathered the pandemic better than most Western countries, with total infections at about 1 per cent of the number of cases in the US. Gradual easing of social distancing measures have helped renew the upward trajectory for Toho Co, which operates movie theatres and produces film favourites including Godzilla.

Local audiences that once flocked to the likes of Titanic and Arnold Schwarzenegger hits started to favour domestic productions in the 2000s as quality and budgets rose. That's helped isolate Japan's movie market from the 2020 blockbuster drought that forced Cineworld Group to suspend operations at American and British theatrs.

Cineworld shares are down 87 per cent this year while those of AMC Entertainment Holdings have dropped 44 per cent. In contrast, Toho's stock has recovered 45 per cent from its March low, nearly erasing their 2020 loss and coming within 9 per cent of their all-time record set last year. Shares rose as much as 0.6 per cent in Tokyo on Thursday.

Toho operates almost 20 per cent of the nation's movie screens and is also a major studio, thanks to Japan's lack of an antitrust law like the one in the US that has barred such arrangements. The company certainly hasn't been immune to the pandemic, with its theatres shut for weeks at the height of the state of emergency earlier this year and forcing postponement of a Doraemon release. Attendance had been limited to 50 per cent but now full shows are allowed, provided popcorns and drinks aren't served.

A recent government campaign aimed at spurring entertainment and travel spending "gives people the impression that it's safe to go see movies now, if theatres take precaution", said Shoichi Arisawa, an analyst at Iwai Cosmo Securities.

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While US studios and cinemas play a chicken-and-egg game - with studios delaying releases because of low theatre attendance, which is in turn due to a lack of hits - Toho has less to worry about. Domestic movies have made up more than half of the Japanese box office every year since 2008 and the country's movie productions are back in business. Many of those movies are made by Toho itself, and are now facing even less competition with Hollywood hits.

Box office data for September will be announced in the coming days, a Toho spokesperson said. Still, receipts in August were down 60 per cent compared to a year earlier, which has some concerned.

"Looking at its longer term chart you wouldn't know there is any crisis at all," said Amir Anvarzadeh, a senior strategist at Asymmetric Advisors in Singapore. "It's amazing to see how Toho has rallied since early August."

He recommends shorting the stock ahead of earnings, set to be reported on Oct 13.

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