KRChoksey is bullish on PVR and has recommended accumulate rating on the stock with a target of Rs 291 in its November 30, 2012 research report.
“PVR Ltd. has announced buyout of 69.27% stake of Cinemax promoters at Rs 203.65 per share which is 10.7% premium to yesterday’s market price of Cinemax. The deal size of promoter’s stake is Rs 395crs.PVR will announce subsequent open offer for 26% stake in Cinemax. PVR will make the acquisition through Cine Hospitality Private Ltd, a wholly owned subsidiary of the company. At present PVR has 210 screens spread across 46 properties across 27 cities. Cinemax is present at 38 locations with 138 screens. It is one of the dominant players in Mumbai it operates 14 Locations with 45 screens in and around Mumbai. Out of Mumbai it has 25 properties and 93 screens. The deal will make PVR the clear market leader with 348 screens; ahead of Inox Leisure-Fame combine (256), which is currently a step ahead of Big Cinemas (254) as the largest operator of multiplex in India in terms of number of cinema screens. Although the transaction looks little expensive at valuation point of view, considering Cinemax’s strong presence in Mumbai which enjoys one of the highest occupancy and ATP, will give boost to revenues going ahead. We believe operational synergies and increased geographical presence will be value accretive. Maintain Accumulate.”
“PVR promoters will infuse Rs 25crs, L Capital which has earlier invested Rs 108crs for 10% equity stake, will put in Rs 82.3crs while Multiples PE fund of Renuka Ramnath will bring in Rs 163crs. Post the transaction, L Capital and Multiples both will own 15.8% stake while promoter shareholding will come down from 40.2% to 32.1%. Incremental debt of Rs 135crs will be raised for remaining part of the deal. Post Cinemax acquisition, PVR will have 348 screens; ahead of Inox Leisure- Fame combined 256 screens and Big Cinemas 254screens. PVR enjoys higher ATP as compared to Cinemax. We believe, post acquisition operational synergies will benefit to both the entities and increased geographical presence will drive higher revenue growth and better operating margins.”
“We believe PVR’s acquisition of Cinemax will bring consolidation in movie exhibition industry and this will inch up ATP and drive healthy revenue growth. At current price, the stock is trading at 12.2x PE to its FY14E earnings. We maintain ACCUMULATE on the stock with a target price of Rs 291,” says KRChoksey research report.
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