Neutral • Price 13.77 on Dec. 7
by B. Riley & Co.
We believe Regal Entertainment is well positioned to benefit from a stable domestic-box-office environment, and should demonstrate improving margins and FCF trends into 2012, as we enter a full digital world. We also remain optimistic about the long-term potential of the Open Road Films joint venture (including a potential future initial public offering). With our Nov. 9 initiation, we were cautiously optimistic about the 4Q movie slate, with some concerns about the clustering of family films around Thanksgiving; unfortunately, we weren't cautious enough. Our 4Q revenue estimate is lowered to $660 million, from $707 million (consensus is $716 million), while our EPS estimate is lowered to eight cents, from 19 cents (consensus 19 cents). Our 4Q estimates now reflect a 0.9% increase in average box office per screen, versus 6% previously. It would take y/o/y increases of about 15% through year's end to reach positive territory for 4Q.
We continue to believe the merger-and-acquisition [M&A] environment remains ripe as we approach studios' digital deadlines. Multiples should also improve further. We…estimate that Regal could increase its annual dividend to as much as $1, from 84 cents, during 2012. Given the stability of the domestic box office, solid balance sheet, improving FCF outlook and the likelihood for accretive M&A, we believe a multiple of seven times our 2012 Ebitda [earnings before interest, taxes, depreciation and amortization] estimate is reasonable, yielding a price target of 14.25. RGC shares also sport a 6.1% dividend yield. Market cap: $2.1 billion.
Eric Wold, analyst with B. Riley & Co. in Los Angeles, said the Verizon deal likely occurred because the telco could provide Redbox with both an existing digital platform and requisite content license agreements—the latter increasingly expensive to attain in a market driven by Netflix and Hulu Plus spending, among others.
Continue Reading >“I think that’s a positive for Netflix,” said Eric Wold, a senior analyst at B. Riley & Co., in an interview with MarketWatch. “Up to now, they haven’t been able to connect to Facebook and Twitter. This can create a lot of marketing possibilities, as their customers can share what movies and TV shows they’ve been watching on Netflix.”
Continue Reading >Eric Wold, analyst with B. Riley & Co. in Santa Monica, Calif., believes Netflix’s defections could reach 4.7 million, which he said represent upwards of $445 million in disc rental revenue up for grabs. In a Nov. 16 note, Wold surmised that the majority of the aforementioned defectors would downsize their monthly rental activity since a-la-carte rentals carry a higher perceived cost than a monthly subscription.
Continue Reading >With the rental agreement between Warner and Redbox set to expire Jan. 31, 2012, B. Riley & Co. analyst Eric Wold doubts Redbox management would agree to a 56-day or longer embargo on new-release Warner titles — even with built-in per-unit discounts.
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