Imax Shows Signs

Disney (DIS Quote) worked with a California company called Real D to convert animated feature Chicken Little. The studio is said to have paid about $8 million to $10 million using Real D's technology. The payoff: breakeven or slight loss for the investment. Compare that to Tom Hanks' Polar Express, which grossed $45 million in Imax when first released and tacked on an extra $15 million when re-released this past Christmas season.

SunTrust Robinson Humphrey's Christopher Rowen cut Imax stock to neutral from buy late last year, saying midsize exhibitors showed only middling interest in adapting their theaters to Imax. At issue was the appeal of Imax to midsize theater owners, who according to Rowen are not going to sign up quickly enough to propel Imax forward.

But on Thursday, Rowen raised the stock to buy. He said that recent developments -- such as the Warner Bros. deal and last week's announcement that big exhibitor National Amusements has signed up for two new installations -- have addressed concerns he raised in December.

"Our downgrade was based on lukewarm feedback from small domestic theater chains, worries that large chains would not pick up the slack, potential for more revenue share deals, and lack of a 1Q06 Hollywood film," said Rowen, who sees the V tie-up boosting the prospect of a takeout. He puts an $11 target on the stock.

Between licensing agreements with exhibitors and concurrent deals with Hollywood, Imax sees some 15% of Hollywood box office returns overall. The company gets about 4% of the box office from its licensed theaters and between 10% and 15% of studio receipts from a blockbuster Hollywood film on Imax screens. Not bad, given the fixed costs of converting to Imax.

Gelfond insists that both his company and studio partners are better off looking at things on a film-to-film basis, and doesn't think a more formal partnership is in anyone's best interests at the moment. In the meantime, V for Vendetta will be released in Imax shortly, followed by Wolfgang Peterson's Poseidon, as well as Superman Returns in early summer of 2006 along with a 3D computer-generated film called Ant Bully and another CGI-animated effort called Happy Feet will all be available in Imax this year.

Early Thursday, Imax shares rose 30 cents to $7.80.