Carmike Cinemas Inc: Strong Movie Operate, is the Price Right?

Carmike Cinemas Inc: Strong Movie Operate, is the Price Right?


Carmike Cinemas, Inc. (NASDAQ:CKEC) operates as a digital cinema and 3D motion picture exhibitor by owning and operating movie theaters in multiple states in the United States. It operates theatres that show films on a first-run basis; and discount theatres. The Company’s focus is on small to mid-sized communities with populations of fewer than 100,000 people. As of June 30, 2012, the Company had 217 theatres with 2,122 screens on a digital-based platform, including 209 theatres with 750 screens equipped for 3-D.

Stock Snapshot:

As of Oct 11, 2012, the stock for Carmike Cinemas, Inc. (NASDAQ:CKEC) closed at USD 12.35 with total market capitalization of USD 215.09 milllion. The average volume witnessed by the stock over the last three months is 165,060 shares. Over the last year the stock has traded in a range of USD 5.85 to USD 15.8. The stock has been trading at a P/E ratio of 18.5, a P/S ratio of 0.42 and a P/B ratio of 3.89

Competitor Analysis:

The company’s competitors Cinemark Holdings, Inc. (NYSE:CNK) has been trading at a P/E ratio of 16.58, a P/S ratio of 1.08 and a P/B ratio of 2.49.

The company’s competitors Regal Entertainment Group (NYSE:RGC) has been trading at a P/E ratio of 20.23 and a P/S ratio of 0.83.

Financial Reports:

Revenue Analysis:

For 6MFY12, total revenue increased to USD 267 million as compared to USD 227.2 million in 6MFY11, resulting in YoY increase of 17.5%. This increase was mainly due to an increase in total attendance of USD 2.4 million YoY and an increase in average admission per patron of USD 0.36 YoY.

Operating Costs:

Film Exhibition Costs:

On the operating costs side film exhibition costs fluctuated directly to the increases or decreases in admission revenue and the mix of aggregate and term film details. Film exhibition costs as a percentage

of revenues are generally higher for periods with more blockbuster films. Film exhibition costs for 6MFY12 increased to USD 92.0 million as compared to USD 78.7 million for 6MFY11. As a percentage of admissions revenue, film exhibition costs for 6MFY12 were 54.1% as compared to 54.0% for 6MFY11.

Concession Costs:

Concession costs fluctuate with changes in concessions revenue and product sales mix and changes in the cost of goods sold. Concession costs increased to approximately USD 11.1 million for 6MFY12, compared to USD 9.2 million for 6MFY11 due to increased concessions sales resulting from increased attendance during 6MFY12.

Net Income:

For 6MFY12, the company reported net income of USD 4.4 million.

Financial Position:

As of 30 June 2012, the Company has USD 85.7 million in cash balances which equates to a cash value per share of USD 4.83. The Company also had total debt of USD 325.3 million which equated to a debt to equity ratio of 576.

Factors to Watch Out For:

* YoY increase in revenues of approximately 17.5%

* Company is continuing to focus on growth with the recent announcement of the signing of a definitive agreement to purchase 16 entertainment complexes with an aggregate of 251 screens based in seven states and 13 individual markets from Rave Reviews Cinemas, LLC, a portfolio company of BV Investment Partners (Rave).


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