Star Wars boosts Cineworld but shares fall on on profit disappointment

Discussion in 'Market News' started by Lily, Jan 12, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    Analysts hoped for better outlook amid concern about fewer blockbusters to come

    The Force was with cinema chain Cineworld in 2015 but may not help it this year.

    Revenues rose 12.3% last year, helped by Star Wars: The Force Awakens, the final Hunger Games film and Spectre, the company said. It opened 18 new cinemas in 2015, with 13 scheduled for this year, and continued to increase the number of Starbucks outlets at its sites.

    2015 is a good result for Cineworld but we had hoped it could be even better. In terms of box office, 2015 will be a hard year to beat. Nevertheless, the film schedule does look better than average, the investment in IMAX/4DX/Starbucks should provide a further boost as should the growth in Unlimited. These elements together with the expansion in the estate should see Cineworld deliver further growth in 2016. However, as mentioned we had hoped for a beat in 2015 and fewer new openings is also slightly disappointing. We remain long-term positive but it in the short-term the shares might find it difficult to outperform.

    Cineworld is better at building cinemas in unsophisticated East Europe where competition is weak, than optmizing performance from its sophisticated UK portfolio where competition is intense.

    The full year pre-close suggests Star Wars performed well with profit expected as we forecast. While low end consensus could increase and we have already upgraded by 8% in 2015, this may disappoint the bulls. However, we put a low PE on now historic 2015 upgrades as 2016 must deliver with no mega blockbusters despite a decent overall slate. The investment case is driven by strong management running a good UK business better (with margin upside), a good new UK opening pipeline, and East Europe mid-term growth.

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