Cineplex Inc (CGX-T)

Volatile, avoid. Comeback in revenue since Covid. Fundamentally weak, broken down. Slightly beat on revenue, but missed earnings. Trading sideways. A big rebound would take more than the company's capable of at this point.

More and more, content is being created for streaming platforms. The "theatrical windows" it used to be able to benefit from are getting shorter and starting to disappear. Struggling on growth. Elevated debt.

Recent pullback since pandemic + sideways range not great for investors. Generally speaking, long term trend is not good. Better options for investors out there. 

Was a great business, cash cow. Deal to be acquired collapsed with the pandemic. Bad luck and bad timing. Stellar management team. Sold off a business to pay down debt, good decision. Movies aren't going away, so you could take a flyer on it.

Not your highest-quality play. Trying to get approval to extend debt schedule. If approved, will add flexibility and improve free cashflows. If all goes well, may be able to reinstate dividend. But a lot has to go right. Pricey at 27x. High risk, but now would be the time to allocate some capital. A lot of the bad news is already out.

Don't own in a registered account, as you want to take capital losses if you're wrong.

He loves movies. Going to be tough to top last year's Barbenheimer. Rumours of the death of movies have been exaggerated. It's going to be a season-to-season, year-to-year stock, rather than a cyclical.

Covid hammered them, while a British company tried to buy them but aborted that deal (now in a lawsuit). It's not cheap seeing a movie, but he goes now and then. Movies are coming back, though. You can't duplicate the experience at home. Still a lot of uncertainty with this stock, though.

Revenue growth is coming back a bit, with lower comparables from last year helping the year-over-year figures. Its debt levels are high, with net debt of $1.9B, and a net debt/EBITDA of 6.8X. Interest costs are $137M (last 12 months) and these will likely rise a bit with higher rates. 12-month cash flow was $116M and therein lies the problem. The debt is mostly due in the next five years. With attendance back, and a decent film slate, bankruptcy is becoming less of a concern, but it is still hard to paint a really positive picture here because of the leverage. 

It is somewhat cheap (0.4X forward sales), but also has a fairly high forward P/E of 20.2X. It could become a takeover target, however, we would not place a high level of probability on that at these current levels. 
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Cineplex remains a recovery story, and its beta of 2.88 signals more risk than usual. It rose 10% in Q1, but the chart was choppy. So, consider Cineplex a partial buy. After all, Covid didn’t kill cinema-going, as some expected, but deferred it. We still love the big screen. Read Dark horses: Nuvei, Cineplex, Boralex for our full analysis.