Sector financial performance:

This company, which is primarily theatre circuit of Canada generating revenue primarily 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.

                                                                                                       click for reading more about this industry

Company performance:

It seems that the demand for admission to theatres of this company has been weak and declined in the past several years (4-9% decline annually) as indicated by continuingly declining attendance. And the decline seems to be accelerating recently while ticket price has been raised. The declining attendance resulted in decrease in revenue of concession while it seems people have bought more popcorn and beverages.

The first three month of fiscal 2018 compared with the same period of 2017

Admission revenue decreased -7.2% due to decrease of 9.3% in attendance offset by increase of 2.4% in average ticket price.

Concession revenue decreased -3.2% due to decrease of 9.3 in attendance offset by increase of 6.7% in spending per patron.

The fiscal 2017 compared with 2016

Admission revenue (same theatre) decreased 3.6% due to decrease of 6.5% in attendance offset by to increase of 2.9% in average ticket price.

Concession revenue decreased 1% due to decrease of 6.5 in attendance offset by increase of 5.5% in spending per patron.

Fiscal 2016 compared with fiscal 2015

Admission revenue (same theatre) decreased 1.1% due to decrease of 4.2% in attendance offset by to increase of 3.1% in average ticket price.

Concession revenue decreased 0.7% due to decrease of 4.2 in attendance offset by increase of 3.5% in spending per patron.

Its gross margin (including advertising, rent, and depreciation) has been down from about 16% to 13% of 2018. And with the increased G&A as percentage of sales (to around 6%), its operating margin went down 7% in 2018 from 11% of 2015.

Stock performance

This stock had a stock price/cash flow ratio of 33. We think that its stock is being relatively overvalued compared its peer - CINEMARK HOLDINGS, INC, which has a ratio of 17. A ratio of 22 may be fair for this stock.