Why Cineworld is OVERSOLD19 Aug 2020 21:36
1. Cinemas operate a profit at as little as 10-20% capacity and are on course to open all their territories before the close of this month. Source: https://www.cnbc.com/amp/2020/04/15/cinemark-offers-a-look-at-movie-going-post-coronavirus.html
2. Face masks worn is encouraging as it promotes the government's message and mitigates the risk of further closure.
In line with government guidelines, all customers will be required to wear face coverings whilst visiting. They can however be REMOVED to consume food and drink (a great up sale for concession sales, you will agree). Source: https://www.cineworld.co.uk/static/en/uk/blog/cineworld-cinemas-reopening-FAQ-frequently-asked-questions-coronavirus-covid-19
3. Schools re-open next month September, millions of children sitting for 6 hours+, side by side, no social distance or masks and frequent touch points vs cinema viewing in staggered, static seating with frequent cleaning and controls is a lot safer. Source: https://www.theguardian.com/commentisfree/2020/aug/18/children-covid-19-english-schools-virus-safe-reopening
4. Debt worries have been MITIGATED.
Debt may be Grade B on the Fitch scale but that is it - it's debt. Investors aren't trading debt securities so the grade B (like Rolls Royce btw) has a default risk of 4-6%, so 94-96% positive outlook for their debt, again from a private investor who is trading equities securities by way of stock purchase is not fazed by this.
Lenders are SO CONFIDENT in Cineworld they INCREASED their ND/EBITDA ratio from 5.5x to 9.0x.
Cineworld passed this test in 2019 at 3.4x SCORING 62% HIGHER than they needed to. No surprise that lenders were willing to relax this to 9.0x this year.
Cineworld will PASS their debt covenant test this December 2020 with ample room to spare.
The next test will be July 2021 at 5.5x and given the progress of a global vaccine and the V recovery that global markets are prediciting, Cineworld is projected to meet this covenant test and pass it too.
Bankruptcy risk of just 7% suggests a great entry or investment point in a diverse portfolio.
Source: https://www.macroaxis.com/invest/ratio/CINE.L/Probability-Of-Bankruptcy
Cineworld will PASS their debt covenant test this December 2020 with ample room to spare.
With no big refinancing obligations looming, Cineworld has liquidity available to survive up to 18 months of lockdowns, estimates Bank of America. Yet the stock is down by more than 75 per cent in the year to date, they quote.
5. Shorts are nothing new, in Jan 2020 this year shorts were 14% and share price was 164p.
6. Tenet the BIG Blockbuster of 2020 is demonstrating positive box office data. Source: 'Tenet' Fever Grips U.K., Claiming Over Half of Ticket Sales for Vue - Variety
7. Cineworld US (73% of their estate) is to open in TWO DAYS TIME and will ACTIVATE, soon 300,000+ subscriptions, each paying upwards of $23/month. That will join the U.K. and European members, too which is a signi
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