- US listing for Regal business possibly on the way, following AMC-mania
- Admissions were down 70 per cent compared to the same period last year
Beleaguered cinema chain Cineworld (CINE) has announced plans for a dual listing in the US.
Since March 2020, it has seen its share price drag along around 60 per cent below its 2019 valuation, as one would expect of a debt-laden cinema chain during a period of global lockdowns. However, the biggest kick in the teeth for management has been to watch the explosion in investor appetite for shares in its similarly-challenged US peer AMC Entertainment (US:AMC).
This is because a wave of “meme” investors came to its rescue. Now Cineworld wants to share some of the love.
The market reacted well to Cineworld’s announcement, its share price climbing 5 per cent on the morning of the results. It’s unlikely that this bump came from the actual meat of the results. It reported revenues of $293m (£212m), which was 38 per cent below the broker consensus, contributed to cash burn of $45m a month and meant net debt was $8.4bn at the end of the period.
Over the medium term, Cineworld’s success depends on whether it can attract US retail investors after the dual listing. The company said getting the backing of "North American equity analysts with a wide domestic investor following" would boost liquidity and potentially set itself up to be another AMC, which used huge retail interest to raise $587m and shore up its balance sheet.
Chasing meme stock status is not an easy task, though Cineworld's position as the most-shorted UK company currently could make it an attractive prospect for Robinhood users that love to stick it to the hedge funds. To go after the same backers of AMC and Gamestop (US:GME), Cineworld is also considering a listing of Regal, its US chain.
Cineworld expects a "gradual recovery of admissions" and "strong trading in Q4" in real-world trading, though this will be conditional on the spread of Delta in the US. Brokers think it will be a slow recovery, with consensus forecasts for a loss per share of 34p for the full year before recovering to 2.2p at the end of 2022, according to FactSet.
This recommendation is hardly based on fundamentals, but if Cineworld markets itself right in the US, then the listing could be the life boat it needs. Speculative buy.
Last IC View: Sell, 106p, 29 March 2021
| CINEWORLD (CINE) | ||||
| ORD PRICE: | 66p | MARKET VALUE: | £ 904.1m | |
| TOUCH: | 65.8-65.9p | 12-MONTH HIGH: | 125p | LOW: 15p |
| DIVIDEND YIELD: | 0.0% | PE RATIO: | NA | |
| NET ASSET VALUE: | * | NET DEBT: | $8.4bn | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
| 2020 | 712 | -1.6 | -37.5 | nil |
| 2021 | 293 | -0.58 | -115.3 | nil |
| % change | -59 | - | - | - |
| Ex-div: | N/A | |||
| Payment: | N/A | |||
| *Negative equity | ||||
