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Fourth day in a row of no new deaths in Scotland - we're beating this thing!
Johnatlaw - Peel Hunt actually raised their forecast recently from 140p to 180p.
There’s two contrasting sides to the US situation - falling deaths and rising cases.
Rising cases is obviously bad, but falling death numbers would push us towards reopening. Ultimately, you don’t lockdown a country the size of the US for something that is ‘only’ killing a few hundred people per day.
Looks like appetite for cinema remains strong, which is to be expected by anyone understanding human behaviour.
Investroid - it’s incredibly poor taste to brag about something that is entirely impossible to prove, to a bunch of strangers online.
This isn’t a zero sum game and I do genuinely hope you have made good money on this, as I hope everyone does. The ‘I’ve called this right all along’ claim though, is just impossible to substantiate, and therefore kinda cheap.
I think it could well have been. It was a big sell.
It’s worth remembering as well that in volatile times, listed equity markets often sell-off in unison. Effectively, the micro situation for Cineworld looks very positive to me. What’s effecting it is more the macro situation - predominantly Covid cases. Sentiment seems to be pretty negative on Covid just now but I do think that will shift as more places open their economies successfully. The US is a basket case - they never took it seriously enough to begin with and are facing the consequences now. They too will overcome it though. Treatment has already vastly improved, making it significantly less deadly.
Not directly related to indoor cinema, but reflective of what I’ve been saying:
https://www.google.co.uk/amp/s/amp.theguardian.com/world/2020/may/29/demand-is-huge-eu-citizens-flock-to-open-air-cinemas-as-lockdown-eases
Demand absolutely WILL be there. It’s a major misunderstanding of human behaviour to think otherwise. At max 50% occupancy I expect it to be difficulty to get tickets once things reopen, initially at least. If that initial demand is sustained until a lineup of new movies is released, I expect tickets to be difficult to come buy until things are back to normal.
No problem. It’s actually one of the reasons I probably began to look into cinema investing. We will suffer a recession, there’s no doubt about that. Cinema going is a surprisingly cheap night out compared to most others.
Actually, cinema revenues tend go up in recessions. It’s considered a relatively ‘cheap’ form of leisure.
haha it's quite funny when you see it there in black and white....
Anyway, on a positive note...0 new Covid 19 deaths in Scotland today! We're also home to the tallest cinema in the world, which happens to be one of Cineworld's flagship operations.
With capacity assumed to be limited to 50%, I'm not sure it would even make that much of a difference. I actually look at the delay of the big Blockbusters as a positive thing - when they do release they can hopefully have higher numbers in attendance. Effectively, if capacity is limited to 50%, and a replay of Back to the Future achieves a 40% full cinema, while a Blockbuster like Tenet would achieve a 50% full cinema....it's not a huge difference. Under normal circumstances you might have a 20% full cinema for the replay of an old classic film, and a 95% full cinema for a new blockbuster. In effect, demand for those classics has gone up, and capacity for those blockbusters has gone down.
I respect your choice to skip the more 'filler' movies, but I would argue that most people that go (even regularly) don't fall into the aficionado category. They want to escape and switch off for a few hours. I actually expect it to be difficult to get tickets for the first few weeks, for showings I can attend at least.
Investroid - you're demonstrating a complete logical fallacy here....allow me to explain.
In normal times, when people have a wide selection of entertainment options available to them, blockbusters attract the crowds to the cinema. I myself am one of those cinema-goes who usually doesn't go unless it's something I really want to see, ans have probably wanted to see for a while.
These are not normal times.
People's entertainment options are limited and have been for virtually nil for 3 months now. That's why they will flock back to the cinema in number when they can, largely irrespective of what's actually on. Because it's a lot more favourable another night of simply 'doing nothing' as far as entertainment goes.
I'm not sure how someone can seriously say that demand won't be there when they see the scenes across the country at the first hint of reopening anything that resembles 'normal life'. People are queuing up to get in to Primark lad! They'll be doing the same to get into the cinema.
The one thing I'm absolutely certain of above all else is that demand will be there. People will return to the big screen. Just as people go to supermarkets without masks, go to mass protests, gather in their thousands in beaches and parks, will undoubtedly head to their local pub at the first chance they get....they too will go to the cinema.
There doesn't even need to be a big Hollywood Blockbuster as such. People will simply go because they can, because they haven't in a long time, and for the same reason they've always done and exactly why cinema's do well in recessions - escapism.
I often think there's a bit of a disconnect between investors and traders here. I would suggest that the former focus their tie horizons on the next 3-6 months at least and ignore much of the hype around delayed movies etc. The question you should be asking yourself is simply - will people go back to the cinema when they can? For the reasons cited above, and given that cinema is effectively ingrained in 'world culture' in the same way going to concerts, attending live sports events, eating in restaurants is.....I firmly believe they will.
It’s small, but both places where Cineworld has a strong presence.
Investeroid - I would agree with all of that, most notably your point "There is no appetite for further lockdowns or measures to control the virus, both by central government or by residents". There is simply no chance of the US implementing furhter lockdown measures in an election year. The giant orange baby cares about re-election, and he won't risk making what would be an incredibly unpopular decision to lockdown.
Cases are up in the US and have been rising for a while now. I think it's important to look at the US on a state by state basis rather than a collective country. Death figures are continuing to trend down the way which is obviously encouraging, as we develop new and better ways of treating Covid, making it a less deadly virus.
Most importantly though, and you yourself allude to this - people will go out. They'll go to bars, they'll stand in line to get into primark, they'll eat out at restaurants, they'll crowd beaches, and they'll go to the cinema when they can too. The evidence we've seen so far confirms all of that. Encouragingly. the places that have been most impacted by covid don't appear to be suffering as a result of this, provided measures are put into place to maintain social distancing and hygiene.
Good post. I like the comparisons between cinema viewing/streaming at home and eating out/home dining. The one thing this virus has demonstrated is that we're all social creatures, who from time to time like to share experiences with others. If I could add one myself - online music streaming will never replace going to a gig.
5 new cases, and 2 new deaths in Scotland over the past 24 hours.
The UK and Europe is still on a very encouraging trajectory and makes up 30% of Cineworld's customer base.
Investeroid - not everyone simply wants to stay at home and sit this out. I wouldn’t count myself as an avid cinema-goes, probably going half a dozen times a year or so, but I would absolutely go to see those golden oldies right now, and I would bet plenty of others would too.
People want escapism more than ever and the cinema provides that at a relatively cheap entry level.
So when going to the cinema to see a golden-oldie is held up against staying at home and doing nothing....it suddenly becomes a much more attractive option.
I think some perspective is needed here. People were expecting far too much, far too soon with CINE, especially after the bounce to 100p. Listed equity markets frequently sell off in unison in response to macroeconomic events - which is exactly what the market is reacting to just now. The covid infection rate in the US has crept up in recent weeks (which any reasonable investor should know was inevitable) and we're seeing a sell off as a result of this. My gut feel with Covid - number in the US (which like it or not is what really matters) will peak in the coming days, will flatline over the next week, and then retreat from there. There may however be more 'waves' or 'mini-waves' if you like. One thing that will not change is the fact that the US, and Europe, is now beginning to open up. In terms of the fundamentals of CINE, well a lot has happened in a few weeks that puts us in a good position going forward:
1. Their revenue split is about 70/30 split between the US and Europe. Europe is on the verge of reopening.
2. They abandoned a deal to buy Cineplex recently which overall is a good thing. They were overpaying.
3. They secured new debt financing recently which would see them survive even the worst case Covid scenario.
4. Strong lineup of new movies to be released over the summer months. Cinema is a relatively cheap form of entertainment compared to others, and with plenty of people staying at home this summer I expect demand for tickets to be huge.
It’s a volatile stock, so you’ve got to be prepared to accept that if you do buy in. It may well be the case that there's little bit more of that coming our way. With economies on the verge of reopening I would expect to see this at double its current price level in 3/6 months.
We were at this price level back towards the end of May. That was before two additional rounds of funding secured (if required), a confirmed date for reopening (which many now have been brought forward by a week), an upcoming relaxation of the 2m social distancing rules (providing CINE with increased capacity), and exiting an unfavourable Cineplex deal.
We’ve received so much good news for the market to not have moved. We’re all here because we believe markets aren’t entirely efficient and I think this is a reflection of that fact. I hate setting price targets within very strict timeframes, but I really do feel as though we will see a nice jump up in the SP over the coming week, with these prices soon being a thing of the past.