Saturday, April 26, 2014

RGC: Q1 numbers beat expectations ...

On Thursday afternoon, 4/24, Regal Entertainment Group (RGC) announced Q1 results which beat expectations on the top and bottom-line.  We think the Company is on track to meet or beat our FY '14 revenue and EBITDA estimates of $3.14bil and $538MM, respectively.  

While RGC's Q1 $8.88 average ticket price was below our $9.23 estimate for the year, we think it will increase throughout the remainder of FY '14 and will be driven by growth in attendance and more box office hits to be rolled out during the summer and Christmas Holidays.  According to management, more children's and matinee tickets, along with lower priced tickets at the acquired Hollywood screens, put some downward pressure on prices. 

RGC's guidance for theatres and screens by the end of FY '14 was below our estimates, but again, higher attendance and likely higher prices will help generate revenues above our expectations for FY '14.   

Q1 concession revenue per attendee was $3.64 and on its way to hit our $3.69 estimate for the year, which represents a 3.4% increase from FY '13.  More menu options for attendees helped drive the 5%+ Y/Y growth.  

The Company is planning to continue its theatre enhancement strategy which includes installing reclining seats and rolling out the IMAX and RPX screens. 

It appears that RGC's and other theatre operators' strategy of differentiating film viewing in theatres from the in-home experience by providing more options on their menus and creating those IMAX and RPX premium experiences, is working.  Of course, the most important attendance and revenue driver - quality and/or popular content - appears to be ever-present.  We still value RGC at approx. $26/sh based on our 5-year DCF model and RGC's 20% stake in NCMI.  It closed at $18.95 on Friday.  We discussed RGC and some other movie theatre companies here: http://mogharabi.blogspot.com/2014/03/amc-ckec-cnk-rgc-some-thoughts-on-movie.html .

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