Despite a quarter that came in a little softer than he expected, Canaccord Genuity analyst Aravinda Galappatthige says he is still feeling positive about Cineplex (TSX:CGX).
This morning, Cineplex reported its Q1, 2017 results. The company earned $23-million on revenue of $394.2-million, a topline that was up four per cent over the same period last year.
“Cineplex reported a record first quarter with total revenue of $394.2-million and adjusted EBITDA of $59.4-million, both up 4.0 per cent versus the same period last year,” said CEO Ellis Jacob. “Box office revenue decreased slightly to $195.4-million due to a tough comparator in the prior year period. However, premium entertainment experiences represented 44.9 per cent of box office revenue, which resulted in a first quarter record BPP of $9.97. Food service revenue increased 1.7 per cent to $113.9-million; media revenue increased 2.6 per cent to a new first quarter record $33.9-million; and amusement revenue of $41.4-million increased 58.9 per cent versus the prior year, largely due to the acquisitions of Tricorp Amusements and SAW LLC, which were completed in the fourth quarter of 2016.”
Galappatthige notes that Cineplex’s Adjusted EBITDA of $59.4-million on revenue of $394.2-million was below his expectation of EBITDA of $64.3-million on revenue of $395.6-million. But the analyst says he is feeling positive about the stock, in part because 2017 is shaping up to be a strong year.
“Our view of CGX remains positive,” says the analyst. “Despite the flattish Q1 box office (albeit significantly better than initial expectations coming into the year), we remain positive on Cineplex heading into what we expect to be a stellar growth year in 2017 (Q2 box office off to strong start with 20+% growth thus far) with EBITDA growth potentially in the 19% vicinity. Steady fundamentals (CPP and BPP), a strong film-slate and other business trending well, including Media and Rec Room, are key reasons driving our positive view on the stock.”
In a research update to clients today, Galappatthige maintained his “Buy” rating and one-year price target of $57.00 on Cineplex.