Sector financial performance:

This company, which is primarily theatre circuit generating revenue from admission and concession, has been grouped into theatre sector in admission to amusement industry.

It seems that the demand for theatre admission of companies in this sector in US market has been continuingly decreasing since 2016 as indicated by decreased attendance (4-6% annually on 2017 and 2018). Due to the decreasing attendance, concession revenue has been negatively influenced as well. It seems that there has been a similar downward trend, in terms of attendance, in international theatre market during the same period of time.

While the decrease in attendance seems to have been offset by increased ticket price and food& beverage price in terms of revenue of admission and concession, it has hurt margins of companies due to increased spending in advertising and lower concession margin. The typical company in this sector has an about 14% gross margin down from about 15% in 2015 with a higher SG&A as percentage of sales (about 6%) and lower operating margin (about 9%).

The typical stock price/cash flow is 26.

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Company performance:

It seems that the global demand for admission to theatres of this company has been weak and declined in the past two years as indicated by continuingly declining attendance. And the decline seems to be accelerating recently while ticket price has been rising. The declining attendance resulted in slower growth in revenue of concession, which has been driven by increasing price.

The first three months of fiscal 2018 compared with the same period of 2016

Admission revenue (US market) decreased 2% due to decrease of about 12% in attendance offset by increase of 10% in ticket price.

Concession revenue decreased 5% due to decrease in attendance offset by increase in revenue per patron (price).

The fiscal 2017 compared with 2016

Fiscal 2016 compared with fiscal 2015

Admission revenue (international market, constant currency) increased 13% due to increase in price and increase in attendance.

Concession revenue increased 16% due to increase in revenue per patron (price) and increase in attendance.

Its gross margin (including advertising and depreciation) has been down from about 10% to 7% of 2018. And with the slightly increase in G&A as percentage of sales (to around 3%), its operating margin went down to about 4% in 2018.

Stock performance

This stock had a stock price/sales ratio of about 0.4. We think that its stock is being relatively slightly overvalued compared with its peer- CINEMARK HOLDINGS, INC, which has a ratio of about 1.3.