RDI READING INTERNATIONAL INC - RDI
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.
It seems that the global demand for admission to theatres of this company has been weak and declined in the past two years (1-2% decline annually in US market) as indicated by continuingly declining attendance. 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 2017
Admission revenue (US market) increased 6% due to increase of 9% in ticket price offset by decrease 2% in attendance.
Concession revenue was flat.
The fiscal 2017 compared with 2016
Cinema revenue (US market) decreased 1% due to decrease in attendance offset by increase in ticket price and concession revenue.
Fiscal 2016 compared with fiscal 2015
Cinema revenue (US market) increased 5% due to increase in ticket price and concession revenue offset by decrease of 1% in attendance.
Its gross margin (including advertising and depreciation) has been flat at about 17%. And with the slightly increased G&A as percentage of sales (to around 9%), its operating margin went down to about 7% in 2018.
This stock had a stock price/cash flow ratio of 37. We think that its stock is being relatively overvalued compared its peer - CINEMARK HOLDINGS, INC, which has a ratio of 17. A ratio of 30 may be fair for this stock.
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