The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
Cinemark’s (NYSE:CNK) international attendance growth was a surprise, leading to Q3 upside. Total revenue was $634 million vs. our estimate of $630 million, and the consensus estimate of $627 million. U.S. revenue was $413 million vs. our estimate of $415 million, and international revenue was $221 million vs. our estimate of $215 million. Adjusted EBITDA totaled $148 million vs. our estimate of $136 million. EPS was $0.41 vs. our estimate of $0.35, and the consensus estimate of $0.35.
Revenue growth in the international segment outpaced our expectations. Cinemark’s international revenue increased 9% year-over-year in Q3, compared to our expectation for a 7% increase in U.S. dollars. Higher-than-expected attendance was offset by lower average ticket, resulting in international admissions revenue of 6%, in line with our estimate. However, concessions revenue grew 16% compared to our 9% estimate and other international revenue grew 20% compared to our 11% estimate, accounting for the upside.
The pace of international theater growth is slower than expected. Theater growth in Latin America is progressing slower than we had expected, however the company maintains that theater builds will still occur according to plan.
Q4 quarter-to-date box office is trending up over 20% domestically and internationally. We recall that in Q4:11 the release slate was crowded with singlegenre weekends, and overall box office receipts suffered as a result. We do not view this as a risk to Q4:12 given a variety of blockbusters within all genres as well as more favorable timing of the release slate compared to last year. As a result, we view our Q4 domestic box office estimate of up 6.2% as conservative. Also, based on boxofficemojo.com and our calculations, we estimate that combined Latin American markets are trending up over 20% in local currency.
We are maintaining our FY:12 estimate for revenue of $2.44 billion while increasing our estimate for EPS to $1.58 from $1.50 to reflect Q3 upside. We are maintaining our FY:13 estimate for revenue of $2.55 billion while increasing our estimate for EPS to $1.78 from $1.77 to reflect better cost control.
Maintaining our NEUTRAL rating and raising our price target $25 from $24 on valuation. After accounting for Cinemark’s ownership stake in National CineMedia, we arrive at a $25 price target, which reflects a 6.3x EV/EBITDA multiple on 2013 estimates, in line with its historical multiple. We increased Cinemark’s multiple to reflect international revenue growth and lower debt ratios, while maintaining caution given its dependence on economic growth in Latin America.
Michael Pachter is an analyst at Wedbush Securities.