What's happened to Cineworld?

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garindan
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What's happened to Cineworld?

Post by garindan » Mon Jan 20, 2020 10:57 pm

Just looking at the secretary's updates showing some of our previous share purchases. Seen Cineworld is now well below 200p. We bought and sold around 260p. Is there an opportunity for us to look into this one again?
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AAAlphaThunder
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Re: What's happened to Cineworld?

Post by AAAlphaThunder » Tue Jan 21, 2020 6:20 am

From the Motley Fool:

Paul Summers | Monday, 25th November, 2019
Debt-ridden
Shares in Cinema chain Cineworld (LSE: CINE) have fallen heavily in recent months and, based on shorting activity (11.5% at the time of writing), a significant minority of traders think there’s more pain to come.

Much of the concern appears to stem from the company’s takeover of US rival Regal Entertainment and the huge impact this has had on its balance sheet. In August, Cineworld sought to quell these fears by announcing that reducing this burden was “ahead of schedule” following the repayment of $570m in term loans. Nevertheless, recent share price action (and the fact that adjusted net debt of $3.3bn is still almost 20% more than the company’s entire market cap) suggests that not everyone is convinced this sort of progress will continue. Nor does everyone think that synergies from the acquisition will come in as high as the estimated $150m.

But debt isn’t the only potential weakness in the investment case.

As star fund manager Terry Smith remarked during a speech earlier this year, most companies involved in the entertainment industry in some capacity have very little visibility when it comes to predicting earnings. Even critically-acclaimed films can do badly and ‘guaranteed blockbusters’ can bomb. On top of this, cinema operators have to contend with the growth in popularity of streaming services such as Netflix, Amazon Prime and, more recently, Disney+ (although the last of these won’t become available in the UK until next year). This doesn’t necessarily spell doom for trips to the flicks, but it must be considered by anyone thinking of investing. The more popular streaming becomes, the more management need to drop prices to lure people out of their homes. That’s particularly problematic for companies such as Cineworld considering the amount of money it is spending refurbishing its screens.

Contrarian bet?
Having lost a third of their value since April, the shares currently trade on just 8 times forecast earnings. That’s usually the sort of valuation that gets value investors salivating. The company is also expected to return a total of 18.3 cents per share in the current financial year, which equates to a chunky yield of 7.1%. At the moment, it looks like profits will cover this amount. However, the aforementioned risk of earnings underperformance if presumed hits like the new Star Wars, James Bond and Top Gun films fail to grab audiences could make the threat of a cut more likely.

There’s something in the suggestion that cinemas might be more resilient in the event of an economic downturn when compared to other, more expensive forms of entertainment, but I struggle to believe that operators such as Cineworld will thrive in such a scenario. Factor in the short interest, and I’m content to let this ‘opportunity’ pass me by.
https://www.fool.co.uk/investing/2019/1 ... ou-own-it/

Cineworld Group [CINE]
Buy: 191.35
Year High: 322.30 [21/01/2020]
Year Low: 187.65 [21/01/2020]
Dividend Yield: 7.65% [21/01/2020]

Image
An impressive dividend of 7.65%.
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garindan
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Re: What's happened to Cineworld?

Post by garindan » Tue Jan 21, 2020 8:03 am

Well in this case it would suggest now is not the time to be investing in Cineworld. However, it should be one we keep an eye on as not so long ago people were very impressed by them! How times can change like the wind blows....
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Re: What's happened to Cineworld?

Post by blythburgh » Tue Jan 21, 2020 11:08 am

garindan wrote:
Mon Jan 20, 2020 10:57 pm
Just looking at the secretary's updates showing some of our previous share purchases. Seen Cineworld is now well below 200p. We bought and sold around 260p. Is there an opportunity for us to look into this one again?
Looks like the members are learning from past mistakes and selling when the time is right.

Just remember folks the rule is: you cannot buy at the bottom and you cannot sell at the top.

A few times you will be able to bread one of those rules but most of the time you will not but you will still be making money.

The other rule is when you see something tipped and decide to buy it, wait and let the froth in the price disappear then dive in.
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