Cinemax India Limited

LINO LAWRENCE
INTRODUCTION
 Company was incorporated on May 22, 2002 under the
Companies Act as Cineline Entertainment (India)
Private Limited to primarily carry on the business of
building, owning, and operating Multiplexes, Theatres
and entertainment centres
 The name of company was changed to Cinemax
Cinemas (India) Private Limited on December 23, 2005.
SWOT ANALYSIS
STRENGTHS
 The company is focused in increasing multiplexes across the
country with close to 100 screens in the next couple of years from
the current 33 screens. This will increase the seat size by 3 times.
 • The biggest strong point for the company is the current location of
its theatres. They are mostly centrally located. Also, unlike its
competitors, they have 8 properties with 7 in Mumbai giving free
rental cost (only opportunity cost involved).
 • The company has a strong experience in building and construction.
Also, there is a brand of 'Cinemax' to be considered. I do not know
if can be translated into revenues. They have a premium theatre too.
The utilisation of this could probably indicate the pricing power for
the company.
 • The company's average ticket size is still above Rs. 100 but with
the introduction of cheaper tickets, this is bound to reduce.
 WEAKNESSES
 High dependence on distributor for showing films in every theatre and
for every film.
 The biggest weakness for any investor, which is mentioned rightly in
the risk factors is the capital structure. It is so unfair for the retail
investor. The bonus issue last year has diluted the earnings in a very big
game. Further, there is also an issue of a preference share issue at no
cost. This has diluted the earnings even further.
 The promoters have been investing in multiple business' streams. This is
an area of concern as it looks like the promoters' are willing to enter into
many areas with a motive of profit. The promoters have more than 25
different companies, partnerships etc and only 4 are operational. There
are too many construction/building companies. I do not understand the
existance of such companies.
 Alternate mediums like DTH, DVD or VCDs can become popular
making the business unattractive.
 Contd..
 Existing competition is with the largest player with a strong backward
integration. In this level of competition, efficiency or utilization rate is
one of the key parameters for success. There is no strong pricing power
with any of these competitors. Given, that they can't reduce the price to
a 'non multiplex' rate, the downside pricing to increase volumes is lost
too. Also, the competitors are expanding very aggressively. Incase, they
are represented in most areas, specially in prime areas, that Cinemax is
operating, this can lead to loss of business.
 Currently, the projection medium is traditional. Newer digital forms can
force the company to incur substantial capital expenditure.
 The issue size exceeds the current networth by 5 times. That is a lot of
funding under the present capital structure..
OPPORTUNITIES
 There is a big demand for theatres across the
country given the poor quality currently in
existence across places. Also, most theatres are
willing to open in Sec B and C cities and move into
small towns too.
 They are willing to work on different model for
pricing tickets depending on time/day
 The contribution of Multiplexes has been
increasing constantly and is close to 20%
THREATS
 Success of theatres are movie specific and this
can tilt towards failure with poor movie scripts.
 Alternate sources of entertainment such as
DTH, DVD can lead to lower sales.
 Removal of entertainment tax benefits can risk
profitability if lower pricing power is not
passed to the customer.
Regarding the share price
 Share price is at Rs.39.15 on 18/12/08
 The share price of the company is showing a
downward trend for the past one year
 It dipped to Rs.39 from Rs.179 in a period of
one year.
THANK YOU