Cineworld Group PLC (LSE:CINE)’s interim results due next Thursday, should “highlight the promising early signs of post-COVID-19 demand for going to the cinema”, according to analysts at Peel Hunt.
In a note on Tuesday, the broker, which rates the move theatre chain at ‘hold’ with a 75p target price, said they believed the company, which has been hit hard by the pandemic, “has cash and facilities sufficient to trade through the balance of the year”.
READ: Cineworld takes on more loans as it emerges from pandemic
“So long as Covid-19 does not flare up again, the business is well-placed to recover…We forecast US$700mln of revenue for [the first half of 2021] and US$350-400mln of cash outflow in the period, including film rental payments relating to December 2020. Although the interims will fall in a quiet month for film releases, we believe that management will be confident that the business is on track to at least return to the 50/60% of 2019 activity levels at which it trades on a cash-neutral basis”, the broker said.
Analysts also said there were signs that the cinema industry was getting back on its feet, flagging that in the US there have already been around 300mln tickets sold this year, compared to only 223mln in 2020.
The broker also noted a slate of major film releases due later this year including the latest James Bond instalment, No Time to Die, the Dune remake and Ghostbusters III in October as well as Top Gun II in November and Spiderman and the fourth instalment of the Matrix franchise in December.
While Peel Hunt noted the poor box-office performance of Disney’s Marvel epic Black Widow recently, they said this “could be attributed to the dual release in cinemas and to streaming” and that the incident and subsequent lawsuit by Black Widow star Scarlett Johansson against Disney over the streaming release “will lead to studios being more supportive of the new 45-day exclusive theatrical release window, fears about which have been a drag on Cineworld’s share price”.
“We are cautious of being more bullish given the capital structure (with net debt heading towards US$5bn on a pre-IFRS 16 basis)and uncertainty in relation to demand post-Covid [however] a more positive view on current trading and more confidence in relation to the release window could drive valuations from here”, the broker added.
Shares in Cineworld were flat at 66.6p in lunchtime trading.