As you may or may not have heard there is apparently a new series of Star Wars films coming out, but I'm not sure what they should be called postquel may be? Any way I'm no great fan of the series as I can honestly say I don't think I have ever sat through a single film of the whole series so far, so why mention it?
Well it seems that according to reports the latest film could break records for advanced sales and this together with other blockbusters this year such as the latest Bond film should augur well for cinema attendances. This expectation is backed up by improving consumer incomes in the UK and therefore suggests that this should be a bumper year for cinema operators.
In the UK the main way to play this is via Cineworld (CINE) a stock I have written on and invested in the past. They have previously announced an IMS in November and I have seen suggestions in the press that they are due to announce one tomorrow and this was confirmed in their 21st October RNS. I would obviously expect it to be positive on the back of this years film releases. The only downside of that is that it will leave them with a tough comparatives for next year when there will also be alternative events to distract cinema goers such as the Olympics and the Euro football championships.
Apart from that caveat how do the shares look currently? Well as you can see from the chart at the end they have come back from their highs in the summer, in common with the market, towards support from the previous high and the 200 day moving average in the 512 to 520p range. Failing that the 450p to 500p range looks like the next band of more significant support.
At the current price of 535p this morning the shares trade on a fullish looking 19x or so for the current calendar year with a yield of 2.9% based on current forecasts. However, as discussed above I assume there might be scope for current estimates to be beaten leading to upgrades which could leave it looking cheaper, although maybe analysts will have already factored these films in and then there is the caveat of a potential hang over for next year.
Talking of which on current forecasts of a further 10% growth this brings the rating down to a more reasonable, but still not bargain basement 17.1x with a 3.2% yield. On the Compound Income Scores it comes in with a score of 71 while the Stockopedia algorithms rank it at 82, so OK but not top decile on either of these measures just yet.
Summary & Conclusion
So the shares look reasonable value if not that cheap, given the growth prospects, while the quantitative scores also seem to reflect this suggesting they are good but not quite a blockbuster pick yet. But as Europe's second largest cinema chain with expansion potential in emerging and under served markets it has its attractions as long as people continue to go to the cinema. However with the increase of streaming services and current unrest on the back of the Paris attacks, I guess people could become more wary about going to crowded public venues and I note that Cinemas are closed in Belgium again today.
Any way it may be interesting down here, if not quite at support levels and not on a fair /bargain rating. But given the trading background and likely growth prospects then maybe it won't get there? However, if it did get down into the 450 to 500p support band it would then be on a more attractive 14.4x to 16x with a 3.4% to 3.8% yield. So probably no rush just yet, but it might be more interesting sub 500p perhaps as ever you pay your money and take choice, or not as the case may be and may the force be with you!