Tuesday, August 5, 2014

CNK, CKEC: A bit more encouraging Q2 numbers than peers ...

Cinemark (CNK)

Unlike its peers, CNK, reported better than expected Q2 results on the top and bottom-line.  We still the stock is worth $36/sh based on our DCF model.  We initially discussed the name in March '14, when it was trading at $28.13/sh. 

Within its US operations, CNK's attendance figures looked better than the rest of the industry as they included the Rave theatres it acquired near the end of Q2 last year.  We said the Company has more room to increase its prices, and it has as US admission revenue per viewer went up 0.56% to $7.20.  We have modeled $7.09 for the year.  Total US admission revenues were down only 0.4% Y/Y.  US concession revenues went up nearly 4% Y/Y, helped by the Rave theatres and higher prices.  US concession revenues per patron came in at $3.67.  We have $3.51 in our model for the year.    

Attendance in CNK's international business declined nearly 10% Y/Y, mainly due to the Company's sale of its Mexico theatres in Q4 '13.  The same can be said regarding international concession revenues.

Operating margin was down 250bps from last year as the acquisition of Rave pushed facility lease expense and D&A higher as percentage of revenues. 

CNK remains on track to meet or beat our FY '14 revenues and EBITDA projections of $2.77bil and $593.9MM, respectively.  
As mentioned earlier this week, Guardians of the Galaxy helped August box office numbers get off to a strong start, which is a bit encouraging; but there is still a long way to go.     

Carmike (CKEC)

CKEC reported mixed Q2 results with revenues coming in ahead of estimates but EPS a bit short of expectations.  Revenues were helped by the acquisitions the Company made last year.  CKEC appears to remain very aggressive when it comes to acquisitions, demonstrated by the Digiplex acquisition announced in Q2. 

Similar to its peers, higher admission and concession prices are partially offsetting decline in attendance.  Admission revenue per viewer was at $7.39 in Q2.  We have modeled $7.27 for the year.  Concession per patron was at $4.36.  We have modeled $4.35 for the year.

CKEC's operating margin took a big hit, coming in at 10.2%, significantly lower than last year's 13.8%, mainly due to much higher leasing expenses after the acquisition of Muvico last year.  We note the Company is on track to hit the $120MM in EBITDA for the year.

We continue to value CKEC at $32 - $33 per share. 

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