Shares of multiplex operators including PVR collapsed by almost 21 percent after Maharashtra government had asked them not to stop movie-goers from bringing their own food. The matter is in the court. The next hearing is on September 3.
A similar case was filed in Jammu and Kashmir High Court and it had allowed movie-goers to carry outside food. Later, the Supreme Court has stayed the order.
When everyone was busy interpreting on outside food, PVR announced few strategic business developments in the last one month which actually helped the stock to gain 20 percent.
New developments in the last one month as follows:
August 3, 2018
PVR renewed its deal with Bookmyshow and Paytm for three years for an aggregate amount of Rs 410 crore towards minimum guarantee and refundable security deposit. The deal is for booking PVR Cinemas’ ticketing inventory on their online ticketing platforms. The company will receive an upfront advance payment of Rs 350 crore.
Post announcement, Kotak Securities raised EBITDA (earnings before interest, taxes, depreciation, and amortisation) estimates by 5-7 percent and upgraded to 'buy' from 'add' with a target price of Rs 1,360 (Earlier TP (take-profit order) was Rs 1,210).
The stock-broking company also said the upfront fee will help PVR to reduce the current debt of around Rs 830 crore. They expect the company to earn a convenience fee of about Rs 10 crore per year from its own website and app.
August 12, 2018
The company said that it is acquiring Chennai-based SPI Cinemas Pvt Ltd. As the part of the deal, PVR will acquire 71.7 percent stake for cash consideration of Rs 633 crore and for the remaining 28.3 percent stake, the company will issue 1.6 million equity shares. PVR will take existing debt of Rs 160 crore of SPI Cinemas on their book.
According to the company, total screens will be around 706 post-acquisition. PVR is also expecting a revenue of around Rs 2,675.1 crore and EBITDA margin of Rs.495 crore.
Analysts remain positive on the acquisition as they say it will help the company to increase its presence in the south. The share of the south region is expected to increase to 34 percent against 25 percent.
Analysts also believe that apart from this short-term benefit, “network effect” of combined entities will catapult it in commanding premium pricing as far as advertisement is concerned.
PVR will continue the SPI brand in Tamil Nadu, the management said. However, it will rebrand SPI properties in other states in the near term. All new property additions in southern India, going ahead, will be under the PVR brand.
The company guided for capital expenditure (CAPEX) of Rs 450 crore for the next two to three years. It also guided 8-10 percent SPH growth for SPI Cinemas. The company is expecting to reach 800 screens by the end of the financial year but no change in ticket pricing of SPI cinemas.
PVR is also expecting 21-23 percent operating margin from the asset taking into account all the synergies and said it is value accretive from year one.
August 27, 2018
The company along with Samsung has launched first Onyx Cinema LED in India on Monday in South Delhi’s Vasant Kunj. The screens offer high dynamic ratio-picture quality with infinite contrast and is accompanied by a custom JBL sound system. The management is also planning to launch new screens in Mumbai and Bengaluru in the first phase. It also said that there will be an increase in ticket price by Rs 100.Overall, analysts remain positive on the FY19 outlook. The recent strategic developments by the company keep them on the positive note.