The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Until this deal complete, this SP isn`t going anywhere. When it does, God knows what next.
*2021 not 2019
The 2019 Trocadero litigation yields some key info:
daily take £21,269 over a 419 day period from March 2018 to May 2019.
Monthly that is £647,534
We identified a working capital shortfall of £87.5m per month from last A/R
87.5m/647k = 135 cinemas at least equal to the Trocadero to meet that threshold without incurring more debt.
CW have reportedly 751 screens in 10 countries not all of course anywhere near the Trocadero level I presume but with those numbers surely enough to cover their short-term liabilities?
Perhaps, the M&A fever caused all of this to unravel? I loathe acquisitions really do nothing but trouble for equity and makes bankers and directors rich but just my (limited) direct experience.
source: https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Ch/2021/3103.html&query=(Cineworld)
GLA
I am 99% certain CW will not win that appeal. I agree the damages awarded may be reduced - if that is what is meant by winning, then I think that is an arguable position.
But honestly, even that outcome I am doubtful on because CW did not really offer up an alternative IIRC. What is not clear from the judgment is how the NPV of the cash flows (synergies) was arrived at. They took an annuity basically and multiplied it discounted back but at what rate was not stated.
From where we are now though October 12 seems a long way off. I`m thinking this won`t go to appeal and a deal will be done and is being negotiated at this time.
If New Co emerges sour for LTHs of course and assuming it is not taken private, a definite opportunity?
I take your point Hex about the 2019 position being in a similar vein and I would agree with that except short term loans look to have increased by 25% and lease obligations up by 70%. Is that kind of pressure sustainable?
Note also, this is just the liquidity (short term) position, it is not testing the solvency (long term) of the business.
We will know soon enough.
Cineplex would not have "ceased to exist" before their assets were hived-up to CW.
Such is the nature of all acquisitions.
CW stood to gain, hence why they were prepared to pay a 40 per cent premium for all of the share capital of CP.
In return, CP were prepared to accept that offer based upon certain assumptions negotiated by their investment bankers and `magic circle` law firm.
But it is possible, that Goldman Sachs and Slaughter and May, they got it all wrong.
And you got it right.
If so I will be asking u for tips on the 2.30 at Haydock park tomorrow :))
"4.25c per share Dividends were being paid to comfortably to 1.4bn shareholders??, what would that equate to on the company balance sheet, annually?"
Well, I think the dividend payments would be indicated in the finance section of the cash flow statement and netted out of earnings reported as retained earnings on the balance sheet.
But speaking frankly, historical dividends are neither here nor there in the present circumstances. CW are facing short term liquidity crisis notwithstanding the long term solvency challenges.
Hex:
It`s 1 billion gap, mi amigo, not 1 million. (I hear your arguments however they are noted, with thanks.)
` “forecasted/ projected cash flow” coming in per month` is not an item on the balance sheet.
Nor is it an item on the P&L nor the cash flow statement.
I`m not in the business of speculating, just analysing CWs own numbers.
You may of course be right and I hope so: CINE has been good to me the last few years as I have traded it, I love Cinema, I don`t love this management team (but that is not relevant).
Look at the cash balances year to year and this reconciles to the CFS and then map to cash out. They have made adjustments which appear well quite odd, but I say this not to crow but to try to put some balance on this BB. The day traders are happy. The LTHs are feeling the pain. We all know that feeling. And I support all of you.
GL
I would advise investors to read the balance sheet; particularly working capital (life blood of any business)
Put simply, the amounts payable within the next 12-months (current liabilities) as against the amount of current assets to meet those short-term liabilities, there is a shortfall - per month - of $85.7mn.
Current Liabilities: $1,561,600,000
Current Assets: $533,200,000
Delta: $1,028,400,000
per month: $85,700,000
Without cash to meet that gap, there is only debt (and interest on that debt). Which compounds the issue rather than solving it.
Additionally, of the non-current assets, goodwill and intangibles makes up 54%.
I have not examined the largest chunk of that, the PPE. Do CW actually own the freeholds to any of the properties? If they don`t then, what is there? Screens... and pop corn machines... and seats.
No capital equipment.
However, I`m just speculating without looking further.
It is unclear how 163.5m in annual lost synergies becomes 1.246bn as neither the time line nor the discount rate are disclosed. Calculated as a perpetuity, the discount rate is about 13.22% : 163.5/0.1322 = 1.236 bn) but that assumes annual synergies for ever.
If it was DCF, over how many years? At standard 10-year, to get to 1.236bn, the discount rate is about 5.4% by my calcs. I read in the CW A/R they use 14.5% which brings the NPV down to 880m on a 10-year timeline.
But this is all very subjective: it all depends on how far out the DCF pushes the cash flows, the terminal value which I presume is n/a and of course the discount rate/cost of capital.
The accountants amongst you will no doubt have a better grasp of this than I do.
"Good morning,
The above noted appeal is scheduled to be heard on October 12 and 13, 2022."
(email from the Court... a fyi, for LTHs.)
GLA
Done a bag...yep, a few bags no doubt... of popcorn maybe a nice handbag for the missus.
Because that is all the stake would be worth; who puts anything more than a few quid into a (95) % stock at 0.0195??
(Now of course, all the cajones show up bragging about putting it 10k lol) Well good luck if you did this is casino time!
There is also the opportunity cost. If you hold e.g. 1,000 units, avarage 0.20 and sell for 0.03692 - T212 - that is 163 lost and 37 which might be put into a better opportunity: energy for example.
Alternatively leave the 37 in in the hope it will climb higher. There ate those who will try to convince you this is another AMC meme stock with short squeeze but that is clearly false imho.
Based on the balance sheet, there is no reason to expect a huge recovery except one: momentum/ hope.
GL
I just read the Cineplex v. Cineworld, 2021 ONSC 8016 judgement and my view is there is nil chance that this will go to appeal if it does Cine lose. There is a possibility of an amendment to the quantum of damages - $1.23 billion plus loose change of $5.5m but that is the limit of what is possible.
Simply put, no way an Appeal Court will overturn a lower Court`s findings of fact. It is also very clear that the judge did not think the CEO a credible witness, in other words, he did not believe his evidence - at least in part. And there has been no error in law nor apparent bias. It comes down to a simple case of contract interpretation and Cine trying to evade a risk which they assumed under the agreement.
I have no axe to grind here, not a ramper or deramper. Held in the past but only for trading. Former commercial lawyer, now retired.
So, I note the 1.23bn has not been included in the latest Annual Report. Expect Cineplex then I suggest to be added to the list of creditors. But if people were holding on awaiting this as an outcome for a decision, do yourself a favour, read the judgement, it is very clear.
I wish you all (sincerely) the best of luck.
https://cdn-res.keymedia.com/cms/files/ca/126/0395_637837419166060123.pdf
For every sale, there must be a buyer on the other end of the transaction and vice versa so how can there be more sells than buys?
I would be wary of listening to so-called experts. So I hear Goldman Sachs this and GS that etc. They are sharks and know as little or as much as you or I i.e. a person who is prepared to do a bit of reading of the Annual Report with a grasp of accounts and/or financial analysis.
They make their money on M&A. They value businesses using DCF – discounted cash flow valuation. To do this they take baseline Year 0 cash flow (actual or forecast) and they guess a growth rate for future years cash flows (up to 10 years). They then discount these cash flows back to net present value (NPV) at the WACC. That is the weighted average cost of capital. That is the split between the cost of debt (might be 6%) and the cost of equity (might be 12%) to give a WACC of 18%. The higher the WACC, the lower the NPV of the business and vice versa.
The cost of debt is easy to calculate. The cost of equity is harder. The practice is to use the CAPM: the capital asset pricing model. In 2004 two well-respected professors -Fama and French – produced a paper called “The Capital Asset Pricing Model: Theory and Evidence”.
After looking at historical performance their view: “the empirical record of the [CAPM] is poor—poor enough to invalidate the way it is used in applications” and “we also warn students that despite its seductive simplicity, the CAPM’s empirical problems probably invalidate its use in applications”
In other words, it is invalid. It does not work in practice. It is still used because there is nothing better. If the CAPM is invalid the valuations are invalid. And this is in the context of GS paid M`s of $ - to product invalid valuations which make themselves and the buyer/seller directors` rich.
DYOR indeed but do not rely of “experts” … Your gut feel is probably as valid!
WoW yep.
see page 79 of AR 2021
Share capital and control
The Company has only one class of share capital formed of ordinary shares. All shares forming part of the ordinary share capital have the same rights and each carries one vote.
Many mining/metals stocks have low PE - see THS at 3, SSW at 5.7 , FXPO at 4, RIO at 6.
The stand out is JLP at 11.
I see RH is up slightly today after being flat for a week - now at around the $14k mark.
I`m happy to take a dividend and look forward to the presentation next week.
It (probably) indicates they have closed their positions having got what they wanted.
LTHs may wish to read this:
https://www.sec.gov/reportspubs/investor-publications/investorpubsbankrupthtm.html
GLA
I accept and agree that Covid and historical earnings are relevant to future performance if market has not changed materially. But that assumption is highly questionable and such macros enable a skipping over of the balance sheet being geared to breaking point.
(Dick Fuld of Lehman Bros did the same: extreme risk-taking without margin-of-safety.)