After three years of outperforming the S&P 500, the big four theater stocks, Regal Entertainment Group RGC, AMC Entertainment Holdings Inc AMC, Cinemark Holdings, Inc. CNK and Carmike Cinemas, Inc. CKEC, underperformed the S&P as a group in 2015. In a new report, Macquarie Research analyst Chad Beynon explains why he believes 2016 will be a bounce-back year for these stocks.
“In ’16 we view theaters as a place to park money, and favor companies with reseat/concession growth, an M&A history/appetite and good capital allocation,” Beynon writes.
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Macquarie prefers Outperform-rated AMC, Regal and Carmike, and believes that Regal and AMC will beat attendance, concession growth and reseat expectations in 2016. The firm also likes Carmike’s new pricing plan and M&A initiative.
Beynon notes the relatively low debt loads and high dividends (3.2-5.0 percent) in the space.
Macquarie expects multiples for the four names to range between 7.5 and 8.0x in 2016.
Disclosure: the author holds no position in the stocks mentioned.
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