AMC Entertainment (AMC) Rent is Coming Due as Management Signals More Equity Dilution, Credit Suisse Reiterates $1.55 PT
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Credit Suisse analyst Meghan Durkin reiterated an Underperform rating and $1.55 price target on AMC Entertainment (NYSE: AMC) after the company reported an EBITDA loss of -$328m , -$18m, ahead of expectations for $-334m. Ticket pricing was ahead of expectations as operating fewer hours drove a mix shift towards full price evening tickets and fewer matinees, and the trend towards theater rentals also helped. Film rental expense benefited from the theater rentals, library product, and lower attendance levels. That said, AMC’s cash burn of $124m in 4Q ramped to $150m in Jan/Feb, and will elevated in 1H21 as deferred rent begins to come due, when it reopens theaters in NYC and CA (LA in the next two weeks).
Due to the increasing problem of rent, the analyst remains negative on the story, stating "The Pro Forma Balance Sheet post recentcapital raise was in line with expectations, including 2/28 Cash on Hand of $1.1b vs our 3/31 cash estimate of $919m (March cash burn guided ~$150m). March debt balance of $5.7b largely vs. our $5.8b est. Current share count is 450.2m vs our 441m expectations. Further, after quadrupling its share count over the past 6 mos, AMC is looking to increase its share authorization by another 500m, suggesting management will look to issue more shares at the market to pay down debt, or exchange debt for equity if debt holders are willing. With further dilution likely, we reiterate our Underperform and $1.55 Price Target.
Shares of AMC Entertainment closed at $10.68 yesterday.
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