CGX (T) Stock Rating: Target: Risk Rating: Cdn$51.41 Outperform Cdn$60.00 Below Average Est. Total Return 19.9% Stock Data: 52-w eek High-Low (Canada) $52.50 - $44.67 52-w eek High-Low (U.S.) NA Bloomberg/Reuters: Canada CGX CN / CGX-T Bloomberg/Reuters: U.S. NA (FYE Dec. 31) a e 2017e Revenue (mln) $1,370.9 $1,486.7 $1,637.2 EBITDA (mln) $249.8 $242.6 $298.3 EPS $1.55 $1.39 $2.00 P/E 33.2x 36.9x 25.7x EV/EBITDA* 14.3x 14.9x 12.1x Free Cash** (mln) $134.6 $96.7 $114.0 P/FCF 24.2x 33.8x 28.6x *Based on forecast net debt. **Calculated as CFO - Capex. Financial Data (as at Septem ber 30, ): Shares Outstanding (mln) 63.5 Float (mln) 63.5 Market Capitalization (mln) $3,264.1 Net Debt (mln) $423.8 Shareholders' Equity (mln) $747.2 Leverage vs 3.5x covenant 1.35x BVPS / Price/Book $11.77/4.4x E ROE 11.6% Dividend/Yield $1.62/3.2% Industry Rating: (Media): Market Weight (NBF Economics & Strategy Group) Company Profile: Cineplex Inc. is Canada s largest motion picture exhibitor with operations across the country. The company has a market share of ~78%, with 164 theatres and 1,676 screens. January 10, 2017 Cineplex Inc. Company Update The NBF Daily Bulletin Media Updating Forecast For Q4 Box Office & Other Adjustments, Record 2017 To Gain Traction HIGHLIGHTS Canadian box office receipts in Q4 were down ~10.8%. Per data from the Motion Theatre Association of Canada, the domestic box office in Q4 fell 13.4%. When adjusting for the calendar quarter, we get a drop of ~10.8%. We d moved to -7.5% from -10.0% after Q3 reporting. We updated our forecast, with our Q4 revenues moving down to $393.8M (CE $417.7M) and Adj. EBITDA falling to $75.4M (CE $83.6M). Still tough Q1/17 comps but 2017 film slate very strong. The Canadian box office was +12.0% in Q4/15 and +21.8% in Q1/16 driven by the 7 th Star Wars film. That said, the movie lineup this year is poised to produce record results in 2017. Movie ticket prices up as of Oct. 1 across select theatres. To help offset minimum wage increases & amidst work done on theatre pricing models, Cineplex acknowledged in media reports on Oct. 4, that ticket pricing moved up $0.22-$0.51 at the start of the month but not at every theatre. These moves, along with future initiatives to optimize ticket prices, appear to offer incremental upside to our forecast. Remains to be seen when premium VOD window arises. We wrote in a Dec. 5 Flash that the Hollywood studios were exploring alternative film distribution platforms/windows which could see some movies made available 17-24 days after their theatrical release for consumer rental at a premium price. With little news since & nothing material likely from upcoming reporting, the focus will next be on CinemaCon in late March. Maintain Outperform and target of $60. Notwithstanding headwinds at the start of the year, we look for record box office receipts in 2017 to complement the company s many initiatives across media, gaming and The Rec Room to help move the stock towards our target which is based on an EV/EBITDA multiple of just over 12x 2018E. Stock Performance (source: Thomson Reuters) Adam Shine, CFA - 514-879-2302 Adam.shine@nbc.ca Associates: Ahmed Abdullah 514-879-2564 ahmed.abdullah@nbc.ca Luc Troiani, CFA 416-869-6585 luc.troiani@nbc.ca
Cineplex Inc. - Snapshot Income Statement in $000s Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16E E 2017E 2018E Revenue Box office 672,678 156,041 186,202 172,571 196,293 711,107 192,639 162,145 180,146 175,093 710,023 749,259 756,752 Concessions 375,039 90,785 108,397 105,464 113,799 418,445 112,006 96,814 109,278 102,419 420,517 448,935 462,403 Cineplex Media 91,378 20,011 25,323 25,029 42,116 112,479 21,097 26,242 29,093 40,010 116,442 122,952 129,714 Cineplex Digital Media 42,811 9,061 9,697 9,267 13,142 41,167 11,961 13,944 15,735 17,742 59,382 78,681 104,252 Media 134,189 29,072 35,020 34,296 55,258 153,646 33,058 40,186 44,828 57,752 175,824 201,633 233,966 Games in Theatres 7,317 2,020 2,473 2,523 2,394 9,410 2,791 2,366 2,725 2,514 10,396 11,435 12,579 Cineplex Starburst (CSI) 21,183 21,183 23,260 22,223 24,042 32,886 102,411 136,188 142,997 The Rec Room 491 3,764 4,255 23,333 53,333 Other 45,493 11,867 13,448 13,392 18,445 57,152 15,159 14,291 14,442 19,367 63,259 66,422 69,743 Games & Other 52,810 13,887 15,921 15,915 42,022 87,745 41,210 38,880 41,700 58,531 180,321 237,378 278,652 Media & Other 186,999 42,959 50,941 50,211 97,280 241,391 74,268 79,066 86,528 116,283 356,145 439,011 512,619 Total revenue 1,234,716 289,785 345,540 328,246 407,372 1,370,943 378,913 338,025 375,952 393,795 1,486,685 1,637,205 1,731,774 Revenue Grow th Box office 1.1% -0.1% 2.6% 6.1% 13.8% 5.7% 23.5% -12.9% 4.4% -10.8% -0.2% 5.5% 1.0% Concessions 7.0% 4.2% 10.6% 14.5% 16.4% 11.6% 23.4% -10.7% 3.6% -10.0% 0.5% 6.8% 3.0% Media & Other 20.2% 17.2% 15.6% 13.3% 57.0% 29.1% 72.9% 55.2% 72.3% 19.5% 47.5% 23.3% 16.8% Total revenue 5.4% 3.5% 6.8% 9.8% 22.6% 11.0% 30.8% -2.2% 14.5% -3.3% 8.4% 10.1% 5.8% Expenses Film Cost 349,564 80,171 102,155 91,567 105,210 379,103 107,386 90,677 95,471 92,449 385,983 400,932 402,970 % of Box Office Revenue 52.0% 51.4% 54.9% 53.1% 53.6% 53.3% 55.7% 55.9% 53.0% 52.8% 54.4% 53.5% 53.3% Concessions 81,455 19,448 23,921 22,325 24,836 90,530 25,314 21,603 24,286 22,839 94,042 99,674 102,653 % of Concession Revenue 21.7% 21.4% 22.1% 21.2% 21.8% 21.6% 22.6% 22.3% 22.2% 22.3% 22.4% 22.2% 22.2% Occupancy 202,085 51,109 50,473 51,239 50,535 203,356 52,733 50,620 51,699 51,653 206,705 215,433 219,458 Other Theatre Operating 345,907 80,914 89,237 89,801 123,329 383,281 117,611 114,416 120,041 129,478 481,546 526,729 549,094 The Rec Room 427 3,200 3,627 19,164 40,000 General and Administrative 58,685 18,911 15,624 15,703 18,514 68,752 19,060 18,296 17,030 19,000 73,386 78,245 81,592 Total Expenses 1,037,696 250,553 281,410 270,635 322,424 1,125,022 322,104 295,612 308,954 318,619 1,245,289 1,340,176 1,395,768 Share of (Income) loss of JV 1-3,982-1,016-1,180-1,470-215 -3,881-331 -355-262 -250-1,198-1,258-1,321 EBITDA 201,002 40,248 65,310 59,081 85,163 249,802 57,140 42,768 67,260 75,426 242,594 298,287 337,327 Margin 16.3% 13.9% 18.9% 18.0% 20.9% 18.2% 15.1% 12.7% 17.9% 19.2% 16.3% 18.2% 19.5% Growth -0.7% 30.3% 9.9% 23.0% 35.9% 24.3% 42.0% -34.5% 13.8% -11.4% -2.9% 23.0% 13.1% 1 Relates to company's share in a theatre in Quebec, one IMAX screen in Ontario, its interest in YoYo's, its interest in SCENE LP, and 50% interest in CSI (until Oct. 1, ). Net of D&A. Source: Cineplex and National Bank Financial estimates. Our forecast s been adjusted for the Q4/16 box office in Canada and other refinements to segments. In so doing, we returned toward estimates in our model before increases made with Q3/16 reporting. In, we lowered revenues to $1.487B from $1.500B, decreased EBITDA to $242.6M from $253.7M, and moved EPS down to $1.39 from $1.51. In 2017, we reduced revenues to $1.637B from $1.647B, lowered EBITDA to $298.3M from $305.4M, and decreased EPS to $2.00 from $2.07. In 2018, we decreased revenues to $1.732B from $1.739B, reduced EBITDA to $337.3M from $340.6M, and lowered EPS to $2.39 from $2.41. We forecast FCF of $96.7M in, $114.0M in 2017 and $140.3M in 2018 vs. $134.6M in which benefitted from a large working capital contribution of $42.5M. Cineplex, Regal Entertainment, AMC Entertainment, and National Cinemedia Trading Multiples CGX AMC RGC NCMI Price $51.41 $34.15 $21.56 $14.82 Shares outstanding 63.5 135.1 156.8 137.2 Market Cap 3,264.1 4,612.2 3,380.4 2,032.9 Cineplex (current trading multiples) E 2017E 2018E EBITDA 202.4 201.0 249.8 242.6 298.3 337.3 EV / EBITDA 24.9x 17.7x 14.3x 14.9x 12.1x 10.6x Re gal (current trading multiples) E 2017E 2018E EBITDA 595.2 568.7 607.7 599.5 645.8 678.1 EV / EBITDA 9.1x 9.8x 9.1x 9.0x 8.2x 7.6x AMC (current trading multiples) E 2017E 2018E EBITDA 448.1 463.9 536.5 556.3 734.7 775.5 EV / EBITDA 13.7x 13.6x 12.0x 12.6x 9.7x 8.7x National Cinem edia (current trading multiples) E 2017E 2018E EBITDA 234.5 199.3 229.9 227.0 250.0 268.0 EV / EBITDA 11.9x 14.5x 12.6x 12.9x 11.6x 10.7x Source: Company reports, Bloomberg, and National Bank Financial estimates.
Cineplex, AMC, Regal Entertainment, and National Cinemedia Target Multiples Cineplex (using target estimates) E 2017E 2018E Target $60.00 $60.00 $60.00 $60.00 $60.00 $60.00 Market Cap 5,576.0 3,780.9 3,802.2 3,809.5 3,809.5 3,809.5 Forecast Net Debt 290.0 311.8 306.1 352.0 349.4 321.3 Forecast Enterprise Value 5,866.0 4,092.7 4,108.3 4,161.5 4,159.0 4,130.8 EV / EBITDA 29.0x 20.4x 16.4x 17.2x 13.9x 12.2x Re gal (using target estimates) E 2017E 2018E Target $23.76 $23.76 $23.76 $23.76 $23.76 $23.76 Market Cap 3,725.4 3,725.4 3,725.4 3,725.4 3,725.4 3,725.4 Forecast Net Debt 2,029.8 2,213.1 2,123.0 2,010.8 1,896.5 1,786.3 Forecast Enterprise Value 5,755.2 5,938.5 5,848.4 5,736.1 5,621.9 5,511.6 EV / EBITDA 9.7x 10.4x 9.6x 9.6x 8.7x 8.1x AMC (using target estimates) E 2017E 2018E Target $37.98 $37.98 $37.98 $37.98 $37.98 $37.98 Market Cap 5,129.5 5,129.5 5,129.5 5,129.5 5,129.5 5,129.5 Forecast Net Debt 1,532.4 1,682.1 1,825.2 2,373.5 2,499.5 2,173.0 Forecast Enterprise Value 6,661.8 6,811.6 6,954.7 7,503.0 7,629.0 7,302.5 EV / EBITDA 14.9x 14.7x 13.0x 13.5x 10.4x 9.4x National Cinemedia (using target estimates) E 2017E 2018E Target $17.62 $17.62 $17.62 $17.62 $17.62 $17.62 Market Cap 2,417.0 2,417.0 2,417.0 2,417.0 2,417.0 2,417.0 Forecast Net Debt 764.0 856.9 871.5 885.5 864.0 832.5 Forecast Enterprise Value 3,181.0 3,273.9 3,288.5 3,302.5 3,281.0 3,249.5 EV / EBITDA 13.6x 16.4x 14.3x 14.5x 13.1x 12.1x Source: Company reports, Bloomberg, and National Bank Financial estimates. Cineplex - Key Credit Metrics ($ mln., unless otherw ise noted) FYE: December Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 E 2017E EBITDA $227.3 $249.8 $266.7 $244.2 $252.3 $242.6 $298.3 Y/Y Change 18.1% 24.3% 26.8% 12.9% 11.0% -2.9% 23.0% Debt / EBITDA* 1.9x 1.4x 1.6x 1.8x 1.8x 1.6x 1.3x Net Debt / EBITDA* 1.8x 1.2x 1.4x 1.7x 1.7x 1.5x 1.2x Net Debt / Capital 35.9% 28.5% 33.4% 35.3% 36.2% 31.8% 31.1% EBITDA / Interest 10.0x 11.1x 12.4x 11.7x 12.9x 12.5x 14.4x FFO / Debt 0.4x 0.6x 0.5x 0.4x 0.4x 0.5x 0.6x Calculations involving Income Statement items are on an LTM basis. Debt includes debentures. *On a pro forma basis w here applicable. Source: Company reports and National Bank Financial. The Rec Room - Locations, Sizes & Targeted Openings Date Announced Location Timing Comments Jan. 26, Edmonton, AB Opened Sept. 29, 60,000 sq ft Sept. 29, Calgary, AB Q2 2017 ~50,000 sq ft Feb. 23, Toronto, ON Q1 2017 ~40,000 sq ft Jan. 5, 2017 Edmonton, AB Summer 2017 >50,000 sq ft Jan. 5, 2017 London, ON Q4 2018 ~36,000 sq ft Source: Company reports.
Cineplex Box Office Revenue Per Patron ($) Cineplex Concession Revenue Per Patron ($) - CAGR = 1.6% - CAGR = 4.3% 7.81 8.13 7.98 8.16 7.87 7.98 8.08 7.86 8.09 8.06 7.99 7.99 8.05 8.17 8.07 8.06 8.34 8.30 8.35 8.40 8.30 8.51 8.72 8.68 8.80 8.88 8.77 8.84 8.84 8.67 8.74 8.79 8.87 8.97 9.04 8.90 9.01 8.89 9.11 9.06 8.97 9.18 9.15 9.13 9.23 9.36 9.36 9.40 9.45 9.37 9.42 9.62 9.63 3.77 3.87 3.95 3.77 3.79 3.67 3.87 3.97 3.97 4.09 3.84 3.96 4.16 4.27 3.98 4.15 4.24 4.03 4.36 4.44 4.26 4.34 4.50 4.69 4.43 4.12 4.27 4.41 4.66 4.81 4.68 4.81 4.54 4.65 4.63 4.82 5.05 5.18 5.08 5.11 4.94 5.14 5.09 5.44 5.50 5.43 5.43 5.74 5.69 5.58 Cineplex Box Office + Concession Revenue Per Patron ($) - CAGR = 2.5% Cineplex Attendance (000s) 11.53 11.90 11.85 12.11 11.59 11.95 12.05 12.43 11.86 11.65 12.04 12.45 12.59 11.84 11.94 12.09 11.71 11.83 12.01 12.42 13.04 12.78 13.22 13.04 13.24 13.66 14.09 14.08 13.20 13.52 13.65 12.66 13.13 13.41 13.83 12.94 13.15 13.77 14.17 14.48 14.12 14.32 14.36 14.20 13.60 13.97 14.22 14.80 14.95 15.36 14.66 15.06 15.21 % Total Box Office From Premium Offerings (Imax, UltraAVX, VIP & 3D) Cineplex Revenue Mix by Period 60.0% 30.9% 5.1% 4.0% 58.5% 30.6% 6.6% 4.3% 55.8% 31.1% 8.7% 4.4% 53.8% 31.3% 10.0% 4.9% 50.8% 29.6% 8.7% 10.9% 59.3% 30.3% 6.9% 3.5% 57.8% 29.7% 8.8% 3.7% 56.1% 30.3% 9. 6% 4.0% 53.9% 31.4% 10.1% 4. 6% 48.0% 28.6% 11.9% 11.5% 57.7% 30.6% 9.7% 2.0% 56.3% 30.7% 9.3% 3.7% 54.3% 30.8% 10.7% 4.1% 52.6% 32.1% 10.4% 4.9% 47.9% 29.1% 11.9% 11.1% 57.1% 28.9% 10.3% 3.7% 55.0% 28.9% 12.1% 4.0% 51.9% 29.4% 14.1% 4.6% 48.2% 27.9% 13.6% 10.3% 58.5% 30.1% 7.7% 3.7% 56.8% 29.9% 9.4% 3.9% 54.5% 30.4% 10.9% 4.2% 51.9% 30.5% 11.2% 6.4% 17,127 16,191 17,272 17,538 20,583 17,146 18,629 19,301 19,695 16,858 18,348 19,011 18,038 19,407 19,219 18,577 18,872 19,037 20,383 Q1 Q2 Q3 Q4 27.1% 35.5% 38.3% 25.3% 40.4% 36.0% 42.2% 41.8% 46.3% 50.4% 31.4% 37.0% 41.7% 34.5% 46.5% 29.2% 40.3% 29.4% 46.8% 30.9% 38.7% 37.8% 38.9% Box office Food service Media Other Cineplex - Evolution of Adj. EBITDA ($000s) Cineplex - Evolution of Adj. EBITDA Margins 85.2 41.1 31.7 30.9 40.2 57.1 47.3 58.7 59.4 65.3 42.8 54.6 57.9 48.0 59.1 67.3 57.5 54.1 62.6 16.5% 12.8% 11.0% 13.9% 15.1% 17.9% 19.5% 18.4% 18.9% 12.7% 19.4% 19.4% 16.1% 18.0% 17.9% 19.3% 16.8% 18.9% 20.9% 18.4% 17.3% 16.3% 18.2% Q1 Q2 Q3 Q4
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