For investors, we are on the lookout for opportunities as this is the peak of earning season for publicly listed companies. Some companies report before the opening bell, while others report during the trading session or after the market closes on a giving day. These date and time of these earning releases is known in advance as a company must announce on a prior date, the exact time and date they are going to release earnings and a possible conference call to discuss the results.
Cineplex Inc. (CGX.TO) released its earnings on August 2. The quarter was a lackluster one and investors sold off there shares. The share price had fallen to $41.50 before rebounding. Some of the highlights are as follows:
- Earned $1.4 million (or $0.02 per share) in the last quarter, down from $7.2 million (or $0.12 per share) a year earlier
- Revenue of $364.1 million, up from $338.0 million for the same period last year
- Amusement Revenue was $45.7 million, compared to $24.6 million a year ago
- Media revenue was $36.6 million for the quarter, compared to $40.2 million in the same quarter from last year.
- Attendance was approximately 16.5 million, slightly down from 16.9 million from a year ago.
- Food Service revenue was $101.4 million, compared to $96.8 million for the same quarter a year ago
- Box Office revenue per customer was $10.86, compared to $9.89 a year ago
- Concessions revenue per customer was $6.03, compared to $5.74 for the same quarter last year
Cineplex is mostly a theatre company, but the company is diversifying its business in other areas of entertainment. These new venues are Rec Rooms complexes, which include eateries, live entertainment, and games. The have launched Rec Rooms in some locations already, and plan to expand across Canada.
A couple of weeks ago, CGX.TO announced an exclusive partnership with Topgolf Entertainment complexes, which combine a driving range with other entertainment options over the next several years.
Conclusion:
The company has missed lower earnings for the past 5 quarters. The struggling economy in Alberta for the last 3 years has hurt their earnings. When the economy of Alberta struggles, the rest of the country feels it. Some people avoid going to the movies due to the cost. These costs consists of the price of a ticket plus the price of concessions. The price of a ticket can be reduced depending on the day and time of the week an individual goes to watch a movie.
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CGX.TO is down 17.08 % over the last month. I do believe people are not going to stop going to the movies. I do believe movie goers , will not spend as much on concessions with the possibility of a recession around the corner.
On August 4, I purchased a 100 shares of CGX.TO at $43.85 per share for a total cost of $4389.95 including commissions.
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Currently $CGX.TO pays an annual dividend of $1.68 per share per year. This purchase adds $168 to my annual dividend income.
I will sell covered calls against this position in the future. I will update my investment tab spreadsheet in early September to reflect this new purchase.
Disclosure: Long CGX.TO
DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Interesting. I used to own this company in the past and rode it from $30 to $50 and sold it a year ago. Looks like its traded sideways since then.
ReplyDeleteI read about their latest investments to bring more people in, but I was a bit unconvinced and no thanks to the poor blockbuster performance from hollywood recycling the same shit every year with reboots and unoriginal sequel/prequel binge. Hopefully they will get their act together. I used to think going to the movies was a cheap form of entertainment that will survive, but Netflix/Amazon/HBO are eating their lunch, and then some. The pie gets smaller, but will be interesting to see how things play out.
Best
R2R
R2R,
DeleteTHanks for dropping by. AMC Entertainment Holdings INC, AMC on the NYSE, recently released their earnings and that share price fell as a result. They are in the movie business as well.
I think people are watching their money more closely nowadays. I think Cineplex needs to lower the concession prices. A have not been to a movie since Batman: The Dark Knight.
I am going to write covered calls against the position. With the minimum wage being increased so much in a few provinces (Alberta and Ontario), it will definitely hurt Cineplex's bottom line.
Interesting. I looked into it more when i saw the big dip but as you mentioned above amc took a beating too! Again road mentioned the movies suck. Yup they do. I go a bit now but more with our son for.kids movies. Cars dispicable me etc. Adult movies these days suck. Probably havent really seen a good movie since gone girl. We stream alot of movies now. On the plus side the rec rooms seem like a good idea going forward. Movies are still nice to go to for a date night, so they will be around for awhile.
ReplyDeleteInteresting buy and certainly controversial. Movies are still #1 outing for teenagers, but the problem is the actual movies. I want to go to the movies for the past 3 months, but I can't choose anything good to watch. Good luck with CGX holding. Hopefully it will go over $50.
ReplyDeleteI remember looking at this few years ago and what interested me the most was them paying out dividends. Although it seems to have a greater hold on the market except their 3D movies, I believe they have a lot of competition.
ReplyDeleteI really think the rate at which they're paying dividends is hitting a ceiling on their ability to grow more. I mean I don't think they have much room to reinvest in their business model.
Cineplex is trying to branch out from being a movie company to an entertainment company. I do not expect too much uplift in their stock price in the short term. We have had no major block buster movies to help their bottom life. Some people only go to the movies to watch a movie like Star Wars, Lord of the Ring's, or Harry Potter.
DeleteWith Cineplex branching out with their REC Rooms in major cities, it might take some time to see the potential. Paying rent and construction costs prior to opening a rec room is a major upfront cost.
I think CGX will not go above $45 the rest of 2017.