China 3D Digital Entertainment Limited has announced the signing of a Letter of Intent with ChongQing PengRun Real Estate Development Company Limited to equip and operate a cinema complex in the prime area of Chongqing. The cinema is schedule to open before Christmas 2012. The cinema enjoys a geographic advantage as it is located at the pedestrian precinct in Chongqing city centre. It occupies an area of more than 3 200 square meters with eight theatres including advanced digital 3D screens. There are 943 seats in total; as well as customer service centre movie side product shop and movie theme book shop. The operation lease is for 20 years and the cinema will be developed in two phases. Phase One investment is estimated to exceed RMB 15 million followed by Phase Two in six months after the cinema commences operation around Christmas 2012. The management expects the cash flow generated by Phase One will sufficiently cover the investment of the second phase therefore there is no fund raising needs for further development. According to the State Administration of Radio Film and Television Chongqing's box office has been growing at a rapid rate recording total box office of RMB 429 million in 2011 a growth of 43 percent compared with 2010. Official statistics showed that Chongqing's urban resident disposable income per capita was RMB 19 100 an increase of 11.1 percent year-on-year. The Group is well positioned to capture the potential growth in consumption by participating in cinema operation. As an operator the Group will enjoy a certain share of box office receipts and the sales of movie related products food and beverage at the cinema. In March the Group announced the acquisition of permanent global distribution rights (excluding Mainland China but including Hong Kong Macau and Taiwan) of a romantic comedy with one of the most sought after casts for Chinese language movies. The movie features the leading actor and actress Kai Ko and Michelle Chen of blockbuster You Are the Apple of My Eye as well as superstar Yen Chi Tan and teenage icon Angela Baby. Set to be another box office success it is believed that the movie will benefit from the audience following created by You Are the Apple of My Eye in Asia. Commenting on the prospects of cinema operation Albert Lee executive director of China 3D Digital Entertainment Limited says Cinema operation is a low-risk business. We believe it will become one of the Group's future growth drivers. Set aside the equipment installation and renovation costs monthly operating expenses are limited. According to the industry's standard assuming a ticket price of RMB 65-70 and an average occupancy of 35 percent it only takes two and a half years for a cinema of 1 000 number of seats to break even. We are most pleased to obtain the [operating] license for a cinema in Chongqing. Our target cinema is comparable to Chongqing UME International Film City (Jiangbei) the number two box office holder in 2010 in size and in location giving us tremendous confidence in its prospects to generate satisfactory return to shareholders. China 3D Digital www.deg8078.com
