WHY INOX in the First place?
Inox with 144 screens having a seating capacity of 40,140 is the largest multiplex operator in the country post the acquistion of Fame India. It holds around 50.3% stake in Fame making it a subsidary post the closure of the open offer in January.
Lets Directly come to the Valuations for the company. Is it Cheap or Fairly valued?
Inox Data .................... Im adding the data for its Subsidary Fame too
No of Shares : 6.19 Crs ................. No of Shares : 3.49 Crs
Market Cap : 310 Crs: ................... MCAP @ Rs 55 : 192 Crs
Enterprise Value : 440 Crs ........MCAP @ Rs Reliance Media Open offer : 290 Crs
50.3% Fame Value : 96 Crs ........ Enterprise Value @ Open offer (Apprx): 377 Crs
One more Safety net Owns the Nariman Point Property (easily worth above : Rs 100 cRs)
& the Pune property : all other properties are leased
Let me add Inox added debt to fund this acquistion to fund the deal (Total Debt: 180 crs).
There is value on a standalone basis with sales growing from
2007------- 162 Crs
2008----------217 Crs
2009----------- 228 Crs
2010---------------256 Crs
and will well post sales above Rs 350 Crores for FY 2011.
oN The Margin front thE mArgins have fallen over the period from 34% in 2007 to 15 odd% in 2010. This would increase going forward as economies of scale improve further and could be considering as a bottom.
The company is going to be paying depriciation to the tune of of Rs 18 crores for 2010 hence i value it on an EBIDTA - efecctive EBIDTA of minimum 50 crs for 2010.
I have not written anything on Fame yet which would be consolidated in the numbers going forward. Fame operation performance is pathethic and would gradually improve with Inox in charge.
Now we have the isusue why Inox? Pvr, Cinemax Reliance Media.?
Pvr is the only logical company to think as with regard to the growth and balance sheet strenght is almost similiar. Reliance Media has lot of debt so better to stay away
BUT A BIG BUT (INOX=PVR); Now its is INOX+FAME SO CLEAR WINNER IS INOX
there is going to be alot of Cricket activity going around So you can BUY IT Gradually too. BUT THERE IS value. UP to you decide.
Good Luck keep Minting.............................................................C U ALL AROUND WITH DETAILED IDEAS IN COMING few days....
Do share your veiws...
Aditya
Dear Aditya
ReplyDeleteVery interesting analysis, but u said that INOX+Fame is a better option to go for rather than PVR, now if we see the recent interview of Mr Ajay Bijili, i found that the phoenix mill property has been sold and leased back.
Also a lot of negative sentiument has been built in the stock due to the flop show of its production venture "kelein hum jee jaan se"
Also i hv ben to both INOX and PVR so many times but i still find that they both remain half empty, what with already going shortage of blockbusters. Also if any movie has the ability to attract footfalls(generally SRK, AK or Salman starrers) , the distribution rights are so costly that high margins can simply not be made.Probably one reason for the consistently decreasing margins.
Moreover i find these multiplexes quite expensive for genearl public, even those who are willing tp pay a premium for comfort. It is only a matter of time before someone will take notice and a mid-premium sort of multiplex chain will start. Something like what Air deccan, Spice jet and Indigo di to Jet, Sahara, Kingfisher and air india.
What is your view on this??
The only comforting factor in favor of PVR is that its promoters have decided against venturing into movie production for the time bring and also they have this bowling operation, which can command a hefty margin.
Otherwise if u look at PVR's charts in the last 5 years the stock has only lost money for its long term investors.
Regards
Aditya Singh
I will break ur questions in two parts.
ReplyDelete1)when i wrote on Inox on 7th FEB stock was @ 50 odd and valuations were as above 300 odd crore company etc.PVR was @ rs 125 odd.
so clearly my first bet was Inox (relative valuation in multiplex space).
WHEN I WROTE LAST ON PVR @93 it had corrected by around 25% from the 7th feb close and offered a safe and i was compelled to buy it myself.@ rs 250 cr market cap with few strings attached.(inox was dwn just 5pc)pvr dwn 25odd%
With regard to pricing id say that premium pricing is at select plexes considering area and cash ppl ready to spend..
ReplyDeleteur next point with regard to mid-premium sort of multiplex chain
1) pvr has introduced this concept..
2) big cinemas tickets are offered @rs 100 odd flat barring latest blockbusters
3)many customers booking shows trgh credit cards and offers der make u get a ticket free so effective cost comes dwn..
btw PVR actually lauching premium gold plexes because they have a audience
to ur question on price agree completly.........
ReplyDelete1)i rember pvr @300 + inox @ 150+..
BUT THEY TRADED AT RIDICULOUS PRICE MULTIPLES ANTICIPATING GROWTH
2) see the sales growth since has improved a great deal..margins have been squezzed so not reflecting completly in the prices..
3)majority expansion is done:
three triggers to look for
1)young population:::::Yes
2)spending power:::::::Yes
3)Content:::::::::::::: Not enough (if u get good stuff to watch ull want to watch if u have the cash
4)ENGLISH MOVIES:::::::biggest trigger as more audience in India start watching english movies revenue flow will pick further
At present AVATAR AND 2012 type movies only bring in cash(maybe bcause they are dubbed) i should check that as well..........
Check revenue collections in Chinese market which have restrictions of screening movies...
In shortmultiples are supressed due to various reasons
1)earlier premiums were higher bcoz people expected stake sale etc(for eg inox came with ipo @ 120 odd when sales were nthng if i compare to above figures..
I feel the multiplex space could get exiting once profit figures show fr 2-3 quarters in a row and then gradual pe rerating take place..
In India many a imes a stock moves up or down just on PE RERATING AND DERATING.....
Last post on 1st question..
ReplyDeleteQ) found that the phoenix mill property has been sold and leased back.
heard it but no bse announcement so not clear
Q)promoters have decided against venturing into movie production
POSITIVE BUT IF YOU GOOGLE A COUPLE OF YEARS BACK HAD SOLD A% OF THIS DIVSION TO JPMORGAN &ICICI..FOR A LARGE AMOUNT..