Business Overview
Cineworld Group Plc (LON: CINE) is a Brentford, UK-based international cinema chain, with presence over nine countries. According to the number of screens, the company’s acquisition of Regal Entertainment Group has formed the 2nd largest cinema business in the world.

Board Changes
On 16^th March 2020, Cineworld Group announced that group’s Director Non-Executive, Helen Weir will be stepping down from her post and will not be standing for coming elections in AGM in May 2020.

Financial Highlights – Financial Year 2019 (31^st December 2019, USD, million)

(Source: Annual Report, Company Website)
 
For the year ending 31^st December 2019, driven by an increase in the revenue from the box office and retail business, the group’s revenue increased to USD 4,369.7 million versus USD 4,119.1 million in the financial year 2018. The gross profit stood at USD 1,620.6 million in FY2019 versus USD 993.7 million in the financial year 2018. The group’s operating profit increased from USD 492.9 million in the financial year 2018 to an operating profit of USD 724.7 million in FY2019. The adjusted EBITDA stood at USD 1,580.3 million in FY2019 versus USD 925.4 million in FY2018. Due to an increase in the net finance costs, the PBT (profit before tax) declined to USD 212.3 million in FY2019 from USD 349 million in the financial year 2018. The PAT (profit after tax) attributable to shareholders stood at USD 180.3 million in FY2019 versus USD 284.3 million in FY2018. The basic earnings per share stood at 13.1 cents in FY2019 versus 22.5 cents in FY2018. The diluted earnings per share stood at 13.1 cents in FY2019 versus 22.4 cents in FY2018.

Share Price Performance

Daily Chart as of April 3^rd, 2020, after the market close (Source: Thomson Reuters)

Cineworld Group Plc shares were trading at GBX 36.47 at the time of writing after the market close on 3^rd April 2020. Stock's 52 weeks High is GBX 303.99 and Low is GBX 18.29.

Valuation Methodology


Conclusion
The Group was facing a challenging time and showed a decline in the financial performance for the financial year 2019. Although the revenue increased for the period, while bottom-line performance has declined. The company is facing certain risks and uncertainties, which could affect its business performance. Failure in cybersecurity and a critical data breach could hamper the operations of the company. Unable to cope up with viewers experience and the industry competition could impact the revenue and profitability of the Cineworld Group. Despite challenging market conditions, Group performance has been resilient across the portfolio. It is focussing on operational performance, cash flow generation, etc. which could benefit its growth. The company prospects look good to invest for the long term. The company’s performance is not affected by the coronavirus outbreak, which shows its robust business model.

The company’s total revenue has grown from USD 797.80 million in FY2016 to USD 4,369.7 million in FY2019, giving approximately 76.27 per cent growth on a CAGR basis.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Buy” recommendation at the closing price of GBX 36.47 (as on 3rd April 2020) with lower double-digit upside potential based on 1.80x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).

 
*All forecasted figures and peers information has been taken from Thomson Reuters.

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