(BFM Bourse) – The world number 2 in the sector, Cineworld, recently warned that it could place itself under the bankruptcy regime in the United States, throwing a chill on the sector. The American AMC and the Belgian Kinepolis have for their part published encouraging results.
Weighed down by the Covid which has emptied their complexes and faced with increasing competition from online platforms which steal exclusives from them, cinema operators have a hard time.
According to the American firm MoffettNathanson, quoted by Les Echos and Business Insider, box office receipts in the United States should reach 7.9 billion dollars this year, then 8.5 billion in 2023. But even on this last date, they would remain down 26% compared to their 2019 level.
In this delicate context, the British Cineworld has thrown a damper on the entire sector in two stages. First by warning in mid-August that attendance at its cinemas was below its expectations and that it did not expect any improvement before mid-November. Then, following indiscretions reported by the wall street journalthe group had to confirm that it was considering placing itself under the protection of “chapter 11”, the bankruptcy system in the United States, where it owns Regal Cinemas.
In any case, the group weighed down by a debt of 4 billion pounds sterling (a little less than 5 billion euros) must restructure its balance sheet. With this in mind, the company has warned that its shareholders should expect high dilution. Consequently, the action melted: the title is trading around 6 pounds against more than 24 pounds at the beginning of August (ie -75%).
Top Gun and Dr Strange to the rescue
The world number one, the American AMC, has tried to reassure investors, obviously worried that the difficulties of Cineworld will spread. The company assured to be confident in its future and recalled having more than 1 billion dollars of cash.
The American has the advantage of having previously published encouraging quarterly results in early August. Its net loss was more than tripled year on year in the second quarter to $121.6 million and its revenue increased nearly threefold to $1.17 billion. AMC also generated positive cash flow of $52 million.
Above all, the American indicated that the month of July had been the best in terms of attendance at its theaters since December 2019. The group was helped by numerous blockbusters such as Dr Strange Where Top Gun Maverick. Films which are obviously also released in Europe and the United Kingdom. “It begs the rather embarrassing question of what AMC is doing right that Cineworld clearly isn’t doing,” said Michael Hewson of CMC Markets.
Very active “monkeys” on the stock market
AMC is not off the hook, however. All liabilities combined, the group’s debt is around 10 billion dollars. But the group has a crucial asset that Cineworld lacks: it’s a “meme stock”. This term refers to stocks popular with individual U.S. investors during the pandemic. These individual traders coordinated on forums and social networks to buy their stocks, raise them, and thus outwit short sellers. These investors are nicknamed on the forums the monkeys (“apes” in English), a reference to the Planet of the Apes (“Planet of Apes”), the famous film.
AMC put its popularity to good use by raising about $2 billion in equity markets last year. Last week, the group gave a nod to its individual shareholders. AMC distributed a dividend in title, by creating a new class of so-called preferred shares, which give the same rights as ordinary shares. Except in the event of bankruptcy of the company where their holders benefit from a higher order of priority than those having ordinary shares to obtain a refund.
These preferred shares began to list on Wall Street under the mnemo APE (“ape”, monkey therefore), explicit reference to lovers of “meme stocks”. AMC has especially warned that it could use this new tool to raise more shares on the market and therefore proceed to new capital increases. The group has authorizations to issue up to 1 billion of these securities and has so far only issued around half of them to pay its dividend in title.
Kinepolis, the good Belgian recipe
Beyond AMC and Cineworld, Kinepolis has also made an impression, recently publishing encouraging results for its first half. The Belgian group listed on the Brussels Stock Exchange returned to a profit of 9.1 million euros. Its revenues have increased more than sixfold and, icing on the cake, its June attendance has exceeded that of the same month of 2019.
This leads analysts to be optimistic about the future of the action of Kinepolis, a group which operates 14 theaters in France. “We can clearly see that the group is returning to the margins it had before the pandemic, with revenue in the first half close to that of 2019, and this despite a lower number of visitors, a sign of the pricing capacity of the group. “, underlines Kris Kippers of Degroof Petercam, quoted by the Belgian stockbroker Goldwasser Exchange.
According to this company, Degroof Petercam, ING and Kepler Chevreux have respective price targets of 65, 77 and 72 euros on the title, while the action is trading around 42 euros, after having lost nearly 10% on the months, penalized by Cineworld announcements.
In France, the Gaumont group, 89% owned by the Seydoux family and specializing in the production and distribution of films and works for television and cinema, will publish its half-year results on September 15.
Julien Marion – ©2022 BFM Bourse
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