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TheStreet.com  Nov 26  Comment 
NEW YORK (TheStreet) -- RATINGS CHANGES Becton Dickinson was upgraded to overweight from neutral at J.P. Morgan. $160 12-month price target. Estimates also increased, given less debt expense for the CareFusion purchase, J.P. Morgan said. Must...
Benzinga  Nov 25  Comment 
Below are the top movie production, theaters stocks on the NYSE in terms of dividend yield. Regal Entertainment Group (NYSE: RGC) has a dividend yield of 3.90%. Regal Entertainment's shares closed at $22.79 on Monday. AMC Entertainment...
Benzinga  Oct 3  Comment 
In a report published Friday, Wunderlich Securities analyst Matthew Harrigan reiterated a Buy rating and $44.00 price target on Cinemark Holdings (NYSE: CNK). In the report, Wunderlich Securities noted, “We concur with Buy-rated Cinemark (CNK)...
TheStreet.com  Sep 3  Comment 
NEW YORK (TheStreet) -- Cinemark Holdingsa was upgraded to "buy" from "hold" at Stifel Financial with a price target of $42. The firm cited theamovie theater chain's stronger than expected performance in Latin America and potential capital...
SeekingAlpha  Aug 27  Comment 
By Marshall Hargrave: When we first highlighted Cinemark Holdings (NYSE:CNK) last year, it appeared that the market was fundamentally misunderstanding the movie theatre operator. Since we first profiled Cinemark, it's been a rocky ride. Shares are...
SeekingAlpha  Aug 15  Comment 
By Dan Strack: Cinemark Holdings (NYSE:CNK) is one of the largest movie theater operators with 488 theaters and 5,609 screens in the US and Latin America. As of June 30, 2014, it was the 3rd largest operator in the US with 332 theaters in 40...
SeekingAlpha  Aug 12  Comment 
ByMarshall Hargrave: Cinemark (NYSE:CNK) managed to post Q2 earnings of $0.62 a share (blowing through consensus of $0.48), and revenues were $717.9 million (beating consensus of $706 million). Shares are up 8% since the start of the month. Q2...




 
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Cinemark Holdings operates the world's 2nd largest movie theater chain both in terms of attendance (237 million) as well as number of theaters operated (424).[1] In 2009, revenues increased to $1.98 billion, an increase from its 2008 revenues of $1.74 billion. For 2009, Cinemark posted a net income of $100.8 million, compared to its 2008 loss of $48.3 million. A key driver of this growth was Cinemark's performance in Central and South America, where Cinemark operates 130 theaters with 1,066 screens in 13 countries.[1]

Another important revenue driver is the box office success of the film industry. Simply put, good movies draw customers into the theaters, which means more revenues and earnings for Cinemark. Fortunately for Cinemark, the movie industry has continued to grow, as the U.S. motion picture industry experienced its third consecutive record breaking year in 2009 and the first in history with U.S. box office revenues in excess of $10 billion.[2] This record year was driven in part by multiple blockbusters such as Avatar, Transformers: Revenge of the Fallen, Harry Potter and the Half-Blood Prince, Up, among others.

Cinemark must compete with other theater chains, as well as other forms of entertainment like in-home theater services, television programming, sporting events and concerts. To combat this competition, Cinemark and other large theater chain owners such as Regal Entertainment Group and AMC Entertainment have moved to a megaplex theater format - Cinemark has an average screen-to-theater ratio of 11.4, much higher than the industry average of 6.5. By providing a centralized location for multiple screens, Cinemark capitalizes on economies of scale, minimizing labor and concession costs. The ability to control costs within its theaters is essential for Cinemark because it has so little leverage with the film distribution industry that provides the content for its movie screens. Cinemark has little pricing power in its contracts with film distributors since the theater industry is highly fragmented, and a deterioration in Cinemark's relationship with distributors would squeeze profit margins.

Business Overview

Financials

The majority of Cinemark's revenues come from its admission tickets, as it earned $1.29 billion from ticket sales in 2009.[3] The other significant source of revenue for Cinemark is its sale of concessions at theaters. In 2009 these sales totaled $602.9 million.[3] Other revenue streams come from theater access fees paid by the advertising firm National CineMedia, Inc. and from arcade games set up in the lobby of some theaters.

For 2009, Cinemark posted a net income of $100.8 million from its 2009 total revenues of $1.98 billion.

Business Segments

Cinemark breaks its operations into two segments: i) U.S. and, ii) International. image:Cnkusandinternationaltheaters.jpg

U.S. (89.2% of 2009 Revenues)

Cinemark operates in 38 states within the United States. Theater location is paramount for Cinemark, as the company ranked 1st or 2nd in box office revenues in 22 of the 25 top US markets. Cinemark targets metropolitan and suburban centers for both acquisition and organic growth. During 2009, this segment earned $1.55 billion in total revenues, a 14.6% increase over 2008.[4] This increase was largely attributed to an 11.6% increase in overall attendance, supplemented by slight increases in the average ticket price as well as price of concessions.

International (10.8% of 2009 Revenue)

Cinemark has a substantial international presence in North America, with theaters in Canada, Brazil, Mexico, Chile, Colombia, Argentina, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala. Total revenues for Cinemark's international segment was $421.8 million, a 9.3% increase compared to 2008.[4] This increase was largely due to a 12.9% increase in overall volume, countered slightly by minor decreases in average ticket prices as well as concessions.

Trends and Forces

Cinemark's Revenues Rely on the Popularity of Films

A movie theater company's success is tied closely to the quality of the films that it shows. For example, in 2009 the movie film industry produced multiple hits including Avatar, Transformers: Revenge of the Fallen, Harry Potter and the Half-Blood Prince, Up, Twilight Saga: New Moon, The Hangover among others. As a result, for the first time ever U.S. box office revenues were more than $10 billion.[2] As a result, Cinemark's 2009 attendance volume increased by over 10%, resulting in gains in revenue as well as net income.

Growing Profitability of Theaters in Central and South America will Increase Cinemark's Revenues

Cinemark has the largest presence of any theater company throughout Central and South America. Cinemark considers these to be emerging markets for the film industry as a result of multiplex theater construction, attractive demographics with a significant teenage population, and a growing acceptance of movie-going as a form of entertainment.[5] The MPAA (Motion Picture Association of America) reports that international box office receipts have increased at a compound annual growth rate of 11.9% from 2003 to 2007.[6] Cinemark's international revenues increased 16.7% over fiscal 2007 to $333.6 million.[7] This continued international growth, and especially growth in Latin America, boosts Cinemark's revenues.

Cinemark Faces Competition from Non-Theater Industry Players

Cinemark's attendance directly affects its revenues. Though Cinemark's attendance and revenue attendance have grown overall in the past few years, increased competition from non-movie theater industries has caused growing concern about declining attendance throughout the industry. A decline in overall box office receipts would adversely affect Cinemark and the rest of the movie theater industry; however, US box office receipts have grown by 3.5% (2006) and 5.4% (2007) in the last two years as a result of high-grossing film releases.[8] Cinemark and other theater companies compete with non-theater entertainment companies, as well, such as in-home theater services, television movie providers and other forms of entertainment such as sporting events and music concerts. Special concern stems from non-theater film providers, such as television movie stations, in-home video and DVDs, and the Internet. Traditionally, film distributors have provided a period known as the theatrical release window in which films are licensed only to theater companies. In recent years, though, the release window has shortened, heightening competition from these alternative film providers.[9] A shortening release window will lead to revenue losses for theater companies as a result of such non-theater competition.


Digitization of Theaters Improves the Movie-Going Experience

In February 2007, Cinemark, AMC Entertainment, and Regal Entertainment Group created Digital Cinema Implementation Partners LLC, a company that will facilitate the implementation of digital movie screens in the companies' theaters. DCIP is still in the process of finalizing finance plans. Cinemark and the other companies are hoping to corner a greater market share by upgrading to digital projection theaters, which will provide enhanced screen quality and better compatibility with IMAX and 3-D format movies. Digital cinematography is the process of capturing a movie on a digital-storing memory device instead of on film. Capturing a movie in this way prevents the common "jitter" of a film-captured motion picture and also saves film distributors the cost of making film prints for each theater, which can cost up to $2,000 each. Unlike Regal Entertainment Group and AMC Entertainment, Cinemark has not begun a roll-out plan of digital projection theaters due to high costs of digital technology.[10] Deterrents to installing digital technology include large capital investment and the breakdown in talks between DCIP and IMAX, 3-D movie providers. For instance, a deal between DCIP and Dreamworks Animation SKG was supposed to be finalized by 4Q 2007, but negotiations have deteriorated.[11] Since both AMC Entertainment and Regal Entertainment Group are also upgrading theaters, installing digital screens will not provide additional value from an enhanced product, but it will keep Cinemark competitive, thus protecting against a deterioration of market value.

Competition

Overview

Cinemark faces competition from within the movie theater industry and from non-theater markets such as in-home movie services, television movie providers and from other forms of entertainment. Theater companies also face cost difficulties because the film distribution industry, theaters' main supplier, is dominated by a few large companies. In 2007, only six film distributors accounted for 78% of US box office revenues and supplied 42 of the 50 highest grossing films.[12] Because the movie theater industry is so competitive, film distributors can substitute between theater companies without losing revenues. Cinemark, along with other theater exhibitors, is prohibited from entering into long-term contracts with these suppliers. Negotiating on a theater-by-theater and film-by-film basis only increases the level of competition for the rights to show films.

Competing Firms

The movie theater industry is top-heavy: the largest 5 companies (Regal Entertainment Group, AMC Entertainment, Cinemark USA, Carmike Cinemas, and National Amusements) control 45% of the market share while the next 5 only control 8%.[13] National Amusements is a private company, and therefore no financial data is available. Revenue information for AMC Entertainment is not yet available for FY 2007. [14]


image:Cnkattendanceandtheaters.jpg [15]

How is Cinemark Different?

Cinemark has a substantial presence in Central and South America. The film industry's ability to grow in these markets will affect Cinemark's revenues and international market share. International box office revenues have increased rapidly since 2003, at a CAGR of 11.9%.[16] Cinemark's international revenues already account for 16.7% of total 2007 revenues.[17] Continued growth of the Latin American movie industry will benefit to Cinemark's revenues and international market share.

How is Cinemark Similar to Other Theater Companies?

The movie theater industry is fragmented and highly competitive. All theater companies face intra-industry competition as well as competition from non-theater industries. Few barriers to entry exist and, according to Regal Entertainment Group's 2007 10-K, moviegoers base their theater decision on proximity, film quality, and amenities.[18] Cinemark and other theater chains lack negotiating power with film suppliers, making it difficult to cut costs.

References

  1. 1.0 1.1 CNK 10-K 2009 Item 1 Pg. 2
  2. 2.0 2.1 CNK 10-K 2009 Item 1 Pg. 3
  3. 3.0 3.1 CNK 10-K 2009 Item 7 Pg. 32
  4. 4.0 4.1 CNK 10-K 2009 Item 7 P.g 33
  5. http://sec.gov/Archives/edgar/data/1385280/000095013408005619/d55075e10vk.htm CNK 2007 10k, Item 1: Business, pg. 3]
  6. CNK 2007 10k, Item 1: Business, pg. 3
  7. CNK 2007 10k, Item 7:Management’s Discussion and Analysis of Financial Condition and Results of Operations, pg. 27
  8. Motion Picture Association of America, "Theatrical Market Statistics," 2007
  9. RGC 2007 10k, Item 1: Business, pg. 7
  10. CNK 2007 10k, Item 1: Business, pg. 14
  11. IT Blogspot and Digital Cinema, "DreamWorks' Katzenberg Disappointed with 3D Talks," 2008
  12. CNK 2007 10k, Item 1: Business, pg.12
  13. Morningstar, "Regal Entertainment Group, Inc.," 8/31/07
  14. RGC 2007 10k, Item 6: Selected Financial Data, pg. 25;AC 2006 10k, Item 7: Discussion and Analysis of Financial Condition and Results of Operations, pg. 45; CNK 2007 10k, Item 6: Selected Financial Data, pg. 25; CKEC 2007 10k, Item 6: Selected Financial Data, pg. 22
  15. RGC 2007 10k, Item 6: Selected Financial Data, pg. 25;AC 2006 10k, Item 7: Discussion and Analysis of Financial Condition and Results of Operations, pg. 45; CNK 2007 10k, Item 6: Selected Financial Data, pg. 25; CKEC 2007 10k, Item 6: Selected Financial Data, pg. 22
  16. CNK 2007 10k, Item 1: Business, pg. 3
  17. CNK 2007 10k, Item 7:Management’s Discussion and Analysis of Financial Condition and Results of Operations, pg. 27
  18. RGC 2007 10k, Item 1: Business, pg. 1
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