Author Topic: AMC - AMC Entertainment Holdings  (Read 14695 times)

roark33

  • Hero Member
  • *****
  • Posts: 623
Re: AMC - AMC Entertainment Holdings
« Reply #50 on: October 15, 2019, 12:47:26 PM »
This is such a joke and at the same time, something you would totally expect from the AMC CEO.  He is just flailing, looking for anything to survive....


txvalue

  • Jr. Member
  • **
  • Posts: 80
Re: AMC - AMC Entertainment Holdings
« Reply #51 on: October 15, 2019, 02:10:08 PM »
Cineplex out of Canada has a similar program where they offer discounts and promotions - things like buying a food combo giving you a rental voucher or "super ticket" where 19.99 gets you a theatre ticket and a digital download once the movie comes out on digital.

https://store.cineplex.com/

So this is meant as more of a loyalty play than tackling someone like Apple head on. Things like this & the NFL game streaming are initiatives to try to get that incremental 25m they targeted in their last round of investor meetings.


txvalue

  • Jr. Member
  • **
  • Posts: 80
Re: AMC - AMC Entertainment Holdings
« Reply #52 on: December 16, 2019, 06:48:50 AM »
Speaking of Cineplex. Cineworld is buying them out for $2.1B (USD including debt).  Cineplex has 165 locations and about 1700 screens. Movies are 80% of their business. Cineplex has 75% share on the Canadian market with just over 10% recliners installed across their circuit.

This deal looks to be about 15xFCF assuming it doesn't materially change. Looks like a potential acquisition to distract from subpar performance by Cineworld in my opinion.

AMC is trading at 3x FCF if you can look out to 2022.
« Last Edit: December 16, 2019, 07:47:24 AM by txvalue »

matt@thesovagroup

  • Newbie
  • *
  • Posts: 4
    • The Sova Group
Re: AMC - AMC Entertainment Holdings
« Reply #53 on: December 16, 2019, 11:32:48 AM »
I just don't see where there is any FCF at AMC, everything is re-invested into capex, and the idea that it is growth capex just doesn't make any sense.  It's capex just to maintain their competitive position.  They haven't materially increased their operating earnings for years if you exclude acquisition-related increases. 

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1056
Re: AMC - AMC Entertainment Holdings
« Reply #54 on: December 17, 2019, 12:20:59 PM »
I just don't see where there is any FCF at AMC, everything is re-invested into capex, and the idea that it is growth capex just doesn't make any sense.  It's capex just to maintain their competitive position.  They haven't materially increased their operating earnings for years if you exclude acquisition-related increases.

I agree with you that the recliner chairs and other supposed growth capex initiatives were really maintenance capex since they didn't materially improve operating results. Industry-wide, all or nearly all the benefits went to movie goers, not the cinema operators.



txvalue

  • Jr. Member
  • **
  • Posts: 80
Re: AMC - AMC Entertainment Holdings
« Reply #55 on: December 19, 2019, 10:37:36 AM »
The renovation criticisms leveled are valid, but the domestic reseats are wrapping up.
 
I have spoken with a few private circuit operators to get a better read on this situation and their consensus is generally that AMC has good technology (compared to the avg. theatre), good assets/locations, subpar management with a note that their real estate deals leave a bit on the table.  Most view Marcus or Cinemark as the best public operators.

It is worth pointing out that they are all in this line of work so they feel that exhibition is here to stay for the foreseeable future. Some would be interested in domestic assets if AMC chose to cleave off anything, which is why I mentioned that idea a few posts back. I continue to think that AMC could carve out a set of screens for cash to start digging into the debt while giving the market some indication of what their assets are truly worth.  Management is clearly not receptive to this at the moment, but that doesn't mean that it doesn't make sense and maybe they will change their tune in 2020 if they don't ever IPO the Euro assets.

I read quite a bit about smaller circuits getting crushed, but most of the operators I have talked to are doing well. The 10-12 theatre level seems to help kick things into the next gear. One in particular I chatted with is just posting tremendous numbers. He has distributed 16x the initial investment over 10 years by picking up existing locations in various states and rehabbing them cost effectively. Speaking with them left me with a more favorable impression on exhibition moving forward and a regret that I had not found him early on when he needed capital...

In short I think AMC's assets and operations are fine, there is some room to tighten the belt with expenses and the debt obviously needs to be addressed but I think buying shares presents some opportunity. I have increased my position 3.5x over the past two months.

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1056
Re: AMC - AMC Entertainment Holdings
« Reply #56 on: December 19, 2019, 12:58:49 PM »
Thanks for the color txvalue

HalfMeasure

  • Full Member
  • ***
  • Posts: 150
Re: AMC - AMC Entertainment Holdings
« Reply #57 on: December 31, 2019, 06:21:40 AM »
Curious to hear from those who are long - how are you thinking about valuation and catalysts to get to the upside vs. the downside given the debt load?

Also curious, who are reasonable acquirers for the European assets as well as the domestic U.S. assets?

matt@thesovagroup

  • Newbie
  • *
  • Posts: 4
    • The Sova Group
Re: AMC - AMC Entertainment Holdings
« Reply #58 on: December 31, 2019, 08:33:40 AM »
One thing to note, there is a big difference between small operators and larger, public companies.  I have owned a few theaters in the past and one of the best strategies is owning a theater in a one-theater city, where you do not need to do a lot of capex and people still come.  The lack of cash flow at AMC is because they are constantly upgrading the facilities.  The ROI on the capex has been vastly over-stated by AMC's CEO.  The ROI is basically zero when the capex is really just maintenance capex because Cinemark and Regal are doing the same upgrades.  They are spending money but really just running in place with their spending.  Aron is suggesting only $300m in capex in 2020.  It will be interesting to come back and look at the end of 2020 whether that number was achieved or he vastly underestimated the spending required to stay competitive. 

txvalue

  • Jr. Member
  • **
  • Posts: 80
Re: AMC - AMC Entertainment Holdings
« Reply #59 on: January 03, 2020, 07:00:09 AM »
One thing to note, there is a big difference between small operators and larger, public companies.  I have owned a few theaters in the past and one of the best strategies is owning a theater in a one-theater city, where you do not need to do a lot of capex and people still come.  The lack of cash flow at AMC is because they are constantly upgrading the facilities.  The ROI on the capex has been vastly over-stated by AMC's CEO.  The ROI is basically zero when the capex is really just maintenance capex because Cinemark and Regal are doing the same upgrades.  They are spending money but really just running in place with their spending.  Aron is suggesting only $300m in capex in 2020.  It will be interesting to come back and look at the end of 2020 whether that number was achieved or he vastly underestimated the spending required to stay competitive.

Cinemark and Regal are doing the "same upgrades" but at a much lower level. I have done work on this cobbling things together from public sources, conversations, presentations etc.  Over the past 5-6 years AMC has spent  50+% more per screen than CNK and the difference is even greater when compared to Regal.  Regal has run their chain for cash for years and their recent results are indicative of this chronic underinvestment. 

Another thing to keep in mind is that upgrading your circuit takes things offline for an extended period while renovations occur so as the CAPEX cycle winds down you should get additional lift from all of your screens being in service at once.

So to put this simply. AMC has an upgraded circuit and now it can dig in to start working their debt down to a more manageable number, they have also already taken the initial A-List hit as the program is over a year old now. Cineworld is actively adding to their debt load, they are way behind the pace on renovations, their domestic numbers are cratering and they have just introduced a subscription plan that will add to the pain already present. These renovations take time, so this is not something that can be instantly solved by Cineworld management and they are going to be under pressure for the next few years.

I think AMC will be fine in 2020 with the 300m level capex spend.
« Last Edit: January 03, 2020, 07:22:10 AM by txvalue »