A quick peruse of the Cinema Stock Index (insert) indicates that the cinema industry isn't doing so well in terms of market performance on a YTD basis. The only stellar performer being Technicolor (TCH) whose stock price has risen over 42% since January 1st. The biggest under-performer being Dolby Labs (DLB) whose share price has dropped 23% YTD. The overall performance of the CMG Cinema Index runs contary to the overall stock market which has risen slightly over 9% YTD.
CMG STOCK INDEX
Price
3/7/11 1/1/11 % Chg. P/E Yield
Ballantyne/Strong 7.11 7.77 (8.5) NA NA
Carmike Cinemas 6.77 7.72 (12.3) 19 -
Cinedigm Digital 1.49 1.68 (11.3) - -
Disney 43.49 37.51 15.9 19 .45/1%
Dolby 51.08 66.70 (23.4) 20 -
Entertainment Properties 47.31 46.25 2.3 24 .70/5.5%
Imax 27.77 28.07 (1.1) 19 -
Netflix 198.18 175.70 12.8 67 -
National Cinemedia 18.40 19.91 (7.6) 31 .80/4.2%
Rentrak 26.28 30.16 (12.9) - -
Regal Entertainment 13.80 11.74 17.6 27 .84/6.1%
Time Warner 36.58 32.17 13.7 16 .92/2.6%
Technicolor 5.09 3.56 42.9 3 -
This month's highlighted cinema stock is Entertainment Properties Trust (EPR) one of the stocks represented in the CMG Cinema Index. EPR, a real estate investment trust (REIT), is up only 2.3% YTD but could be a big beneficiary of a rising commercial real estate market - when that market normalizes - and by an increase in the inflation rate as EPR has built-in escalators in its lease agreements. Additionally, it currently pays out a very respectable yield of 5.5% .Overall, we do not see any of the stocks in the CMB Stock Index as pull away performers but will for the most part be flat-line trenders. Several, such as Netflix (which has been a comet over the last 18 months) will trend down, given its meteoric rise and the current large volume of short selling on this stock.
Cinema Stock of the Month: Entertainment Properties Trust
EPR is a real estate investment trust that develops, owns, leases, and finances properties geared toward consumer entertainment venues in N. America.
As of 2/28/11, EPR's year-end, assets totalled $2.9billion of which $1.5billion was invested in 105 megaplex cinema sites - housing approx. 1,950 movie screens. In addition, to cinemas, EPR holds investments in retail centers, vineyards and wineries, ski parks, and public charter schools.
EPR's cinema tenents include: AMC Theatres, Regal Entertainment Group, Carmike Cinemas, Rave Motion Pictures, CineMagic/IMAX Theatres, Southern Theatres, Muvico, and Kerasotes Theatres.
Over the last three years EPR's revenue stream dipped from a high of $270m in '08 to $231m last year. While net income went from $102m to $58m over the same period, this performance mirrors the downturn in the commercial real estate market, which has yet to recover from the recession.
Over the last 3 years management has done of good job of de-leveraging the balance sheet and with its lock-in rate leases with the movie circuits will maintain a good stream of income and coinciding dividend payout. Dividend payouts for 2011 are anticipated to be $2.80/share , equivalent to a 5.9% yield at its current share price.
Going Forward: EPR offers a good, stable return. It currently has the opportunity to purchase properties at bargain prices, and its downside - default by leasees - is not a present threat. EPR's portfolio is skewed toward the cinema exhibition industry but has little risk regarding the ups/downs of the boxoffice and its leases all have built-in inflation escalators. My guess is EPR will, going forward, place more emphasis on non-cinema properties and holdings, particularly the charter school arena, and less on cinemas.
If you are looking for a good, steady yield EPR offers a comparable return to most other REITs and may be positioned to take better advantage of the commercial real estate market opportunites than most.
THE CMG TrendSETTER List
Rising Falling Splat
Yoga Kickboxing Palates
Streaming DVD rentals DVD sales
Kinect Wii Fit Guitar Hero
Lululemon Under Armor Sweats
Best & Happy Movie Going
Jim Lavorato
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