Don VialouxCineplex IncCGX.TOWAITAug 25, 2017

He loves movies. Going to be tough to top last year's Barbenheimer. Rumours of the death of movies have been exaggerated. It's going to be a season-to-season, year-to-year stock, rather than a cyclical.

Covid hammered them, while a British company tried to buy them but aborted that deal (now in a lawsuit). It's not cheap seeing a movie, but he goes now and then. Movies are coming back, though. You can't duplicate the experience at home. Still a lot of uncertainty with this stock, though.

Revenue growth is coming back a bit, with lower comparables from last year helping the year-over-year figures. Its debt levels are high, with net debt of $1.9B, and a net debt/EBITDA of 6.8X. Interest costs are $137M (last 12 months) and these will likely rise a bit with higher rates. 12-month cash flow was $116M and therein lies the problem. The debt is mostly due in the next five years. With attendance back, and a decent film slate, bankruptcy is becoming less of a concern, but it is still hard to paint a really positive picture here because of the leverage. 

It is somewhat cheap (0.4X forward sales), but also has a fairly high forward P/E of 20.2X. It could become a takeover target, however, we would not place a high level of probability on that at these current levels. 
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Cineplex remains a recovery story, and its beta of 2.88 signals more risk than usual. It rose 10% in Q1, but the chart was choppy. So, consider Cineplex a partial buy. After all, Covid didn’t kill cinema-going, as some expected, but deferred it. We still love the big screen. Read Dark horses: Nuvei, Cineplex, Boralex for our full analysis.

It's a very difficult story. People will take time returning to the cinemas. Cineplex did a good job offering ancillary services. Also, film studios like Disney are rethinking how they will exhibit movies (i.e. streaming). Will the Marvel blockbusters return to big screens?