Author Topic: CGX - Cineplex  (Read 6621 times)

wabuffo

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Re: CGX - Cineplex
« Reply #20 on: August 28, 2020, 07:37:52 AM »
For those interested, here's the Mittleman's posting their Cineplex investment as a ValueInvestorsClub (VIC) idea (for those with 45-day guest access - you just have to sign up for free access. Default is 90-day guest access).

https://valueinvestorsclub.com/idea/CINEPLEX_INC/2558512132#description

wabuffo


Foreign Tuffett

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Re: CGX - Cineplex
« Reply #21 on: August 28, 2020, 08:29:41 AM »
For those interested, here's the Mittleman's posting their Cineplex investment as a ValueInvestorsClub (VIC) idea (for those with 45-day guest access - you just have to sign up for free access. Default is 90-day guest access).

https://valueinvestorsclub.com/idea/CINEPLEX_INC/2558512132#description

wabuffo

Thanks for posting that.

In some ways (like the history section) that write up is very well done, but other parts are a little puzzling.

So apparently "The Canadian movie theater box office has been essentially flat over the past 10 years", but Cineplex has grown share ("managed to grow sales from C$964M to C$1,665M (+73%, 5.6% CAGR) over those same 10 years.").

The author's conclusion is "the out-performance Cineplex achieved over the previous decade bodes well for its prospects." My thought was the opposite, they already have 69% market share. How much more share can they take? At a certain point they aren't going to be able to outpace the Canadian box office.

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These guys were also quite wrong about Carmike's value. They made a big fuss about AMC getting a bargain, but, as we learned on AMC's Q2 2017 call, the real story of the Carmike acquisition was AMC overpaying for relatively low quality cinemas.

They were also wrong in seeing AMC as a good opportunity after the Carmike acquisition closed....not to beat a dead horse (so to speak) but even disregarding COVID these guys have been generally wrong about the industry for years now
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5xEBITDA

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Re: CGX - Cineplex
« Reply #22 on: August 28, 2020, 09:36:30 AM »
I commented on this in the Aimia thread but probably more appropriate here so as to not derail the Aimia commentary.

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Meh. Not super impressed with the thesis...I know he has a long history with the theater industry, but I think the bigger picture is missed here. It doesn't make sense to say that just because theaters re-open people will go back. There was a great article regarding this on Bloomberg yesterday - I recall about 60% of survey respondents (who described themselves as frequent movie goers) won't go back to the theaters just because they re-open. The second problem is his reach that the Company will be able to thrive during a flat box office as they've done in the past without going into detail on how they did that. You thrive in a flat market by having pricing power, which being a #1 in the market gives you. Increasing ticket & food prices is a great way to offset declining ticket volumes while also boosting your margins. I think it's safe to assume that once theaters re-open they will need to cut pricing in order to just get people in the door. It makes zero sense for him to be modeling a go-forward margin higher than the 2009 - 2019 average.

The other thing I'll add here is that at this point, the movie theater industry is incredibly well researched by deep value / distressed investors and where the industry's stocks & bonds are priced is probably somewhat of an efficient price.

valueinvestor

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Re: CGX - Cineplex
« Reply #23 on: August 28, 2020, 11:24:48 AM »
To be fair, I think Cineplex is a different breed when comparing AMC and other companies - I never found the theatre space compelling, but at the end of the day Cineplex is valuable (there's no doubt).

I also have mixed feelings about Mittleman, as I always seem to not agree with their thesis but SOP seem to be on point. I think they always think that if they have 100%+ upside, then anywhere in the middle should be fine. Also Aimia left a bad impression, especially when they settle for less than SOP value without so much of an explaination.

Which brings me to my issue with Cineplex, what happened at Aimia could happen here. The issue is not value, but rather extraction for common shareholders. If I was an large investor, I would definitely focus on SCENE - there's a lot of potential. Imagine what SCENE would valued with a spin-off transaction, and ran as an independent public company.

jasonchin

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Re: CGX - Cineplex
« Reply #24 on: August 28, 2020, 02:29:24 PM »
Can Scene exist without Cineplex? It's similar to the concept of network effect. If the customers aren't attracted to the platform, the value of the platform should decrease. 

valueinvestor

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Re: CGX - Cineplex
« Reply #25 on: August 28, 2020, 03:25:59 PM »
No determination can be made, but if it canít, then run Cineplex and invest in Scene. Itís hard to build a co-branded loyalty program that has 25% of the Canadian population. Where the data is relevant, as it has their spending habits of the users.


bizaro86

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Re: CGX - Cineplex
« Reply #26 on: August 28, 2020, 04:37:22 PM »
I actually think selling a stake in scene to Aimia would probably make quite a bit of sense for both parties.

valueinvestor

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Re: CGX - Cineplex
« Reply #27 on: August 28, 2020, 05:30:47 PM »
Probably wouldnít be surprised if itís in the cards. Pun intended.

samwise

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Re: CGX - Cineplex
« Reply #28 on: September 02, 2020, 06:41:06 PM »
I actually think selling a stake in scene to Aimia would probably make quite a bit of sense for both parties.

Wouldnít Scotia bank be the most likely buyer? Scotia can pay to protect their card franchise (assuming they think its worth protecting). They could own half the loyalty program and pay cash to CGX. Similar to how the banks funded Air Canadaís buy of Aeroplan.

Aimia brings nothing to the table except some cash. They donít even have in-house loyalty experts anymore, which scene doesnít need.

bizaro86

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Re: CGX - Cineplex
« Reply #29 on: September 02, 2020, 07:30:36 PM »
I actually think selling a stake in scene to Aimia would probably make quite a bit of sense for both parties.

Wouldnít Scotia bank be the most likely buyer? Scotia can pay to protect their card franchise (assuming they think its worth protecting). They could own half the loyalty program and pay cash to CGX. Similar to how the banks funded Air Canadaís buy of Aeroplan.

Aimia brings nothing to the table except some cash. They donít even have in-house loyalty experts anymore, which scene doesnít need.

Scotia already owns half of scene. That's probably  good point - Scotia would be a deeper pocket and controls the primary revenue stream, they would be a more natural buyer.