Cineplex (CGX) discussion

Jeenyus1 wrote: ↑ Try to handicap what you like and what you don't like from Cineplex's diversification strategy. If you're like me and some others and don't like the Rec Room and Top Golf, e-Sports, etc. other than the mainstay Cinema business - cut it out of the valuation for a discount and buy accordingly.

This article goes into the details and is a good starter - http://business.financialpost.com/inves ... t-cineplex

The fear is costs going up, profits going down, valuations still high and possible payoff related to the diversification strategy unknown..

busybe wrote: ↑ Thank you for your insight, very helpful.

llpresident wrote: ↑ Seems like an epic waste of money. They are going to dump money into this diworsification and it may not work out. We know most new businesses fail and that is what they are undertaking, an entirely new business. Theyll get some corporate team building exercise 1999 money but I don't see individuals paying out this kind of cash.

I would take just the cinema business at about a 10 to 12 PE. With the diworsification it's a no touch IMO

Jeenyus1 wrote: ↑ Food for thought:

The Rec Room is targeting millennials and baby boomers and will be located in the hubs of cities across Canada. Millennials are very active, they’re very engaged. And when they socialize they’re much more comfortable going out with a group of people and going their own way and coming back and meeting up. Millennials also tend to spend their disposable money on quality, dishing out more for a premium environment like the Rec Room, Heasman said. But they can be turned off an experience if it lacks quality compared to others.

The quality has to be spread through everything, and that includes service. That would be the key to sustainability,” Heasman cautioned. The Cineplex space will have two upscale casual restaurants that will feature traditional Canadian recipes using local ingredients where possible and will also be centred around cooking on a wood-fired grill. We take great raw ingredients and we make food ourselves,” Terry said, adding there will be an emphasis on customizable and shareable dishes such as gourmet poutines and made-to-order doughnuts.

This type of premium food in a unique environment is exactly what millennials are looking for, said Robert Carter, the executive director of NPD Canada, which does market research on the restaurant industry. Though growth in the restaurant business is relatively flat, when consumers do go out to eat, they’re looking for more enhanced experiences, said Carter. “I think this move with the Rec Room to create an experiential dining environment is definitely on trend with what we see consumers are looking for. Cineplex aims to open between 10 and 15 locations across the country, including in London, Calgary and a second location in Edmonton. They’re also planning on opening an additional 10 to 15 smaller locations that will be more about games than food."

https://www.thestar.com/news/gta/2017/0 ... ident.html


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Now, let's take a look at the Rec Room's Three10 menu and pricing and see exactly how this plays out in the real world for a millennial couple who are in lower income brackets than baby boomers coupled with little to no brand loyalty.

Standard 'night out' dinner template for 2 people consists of (I picked items randomly):

1 Appetizer - POPCORN FRIED CHICKEN $14
2 Drinks (prices not listed, but a glass of wine is usually the cost of the entire bottle so lets say its - $12 x 2)
2 Entree - (1) HOT SMOKED ORGANIC B.C. SALMON $18 + (1) 10 OZ MAPLE BRINED PORK CHOP $24
1 Desert - (1) THE REC ROOM SUNDAE $9

Total bill = $71 + tax+gratuities without even touching a single game.

I couldn't find pricing listed on their website for the various games/events so I looked through Google Reviews for some info:

"$10 gets you about 6 arcade games, and some of them only last a few seconds."
"Axe throwing was good, fun, and overall a good value (4 throws for 5 bucks)"
"unlimited gaming option for $50 but comes with a 4 hour play limit."

I would honestly peg the entire night out @ $130+ per person after accounting for a few games. The employees (millennials) of this establishment probably won't even make this much per night after taxes.. $13.60/hour (minimum wage in AB) x 8 = $108.80

How sustainable does this business model seem to Millennials in the long-run? But one might think that this place would be fantastic for group events!

"Seems they still have a problem with their sales team calling people back. We wanted to have a company party for approx 60 people. Looking at at least $6000+".

Hard to tell if the group quote @ $100/person includes any food and or games at all.

http://www.therecroom.com/south-edmonto ... nt/Three10

Mike15 wrote: ↑Don't understand the extent to which CGX is getting hammered. Personally, I prefer going to Landmark, but Cineplex is absolutely dominant in the movie business in Canada, and Canadians are always going to go to movies.

At this price it's a 4.68% dividend yield, and their dividend's been steadily growing. Tempting to add if it looks like we've bottomed.

treva84 wrote: ↑ I am a millennial and I live in Edmonton and I am well aware of this South Edmonton location, which I think has been open at least 1 year. I've driven by it many times but I've never been compelled to go in.

About 10-15 years ago there was a place called Reds in West Edmonton Mall - it was essentially the same thing as The Rec Room except it also had a small concert venue. I loved going to Reds in high school but it became dated and boring as I entered university.

Every time I think of the Rec Room I think of Reds and it turns me off to the idea. A few of my friends have gone to the Rec Room once to check it out, and never went back.

This is anecdotal and I may just be judging a book by it's cover, but the Rec Room idea doesn't appeal to me.

However if / when there is a Top Golf facility in Edmonton I'm definitely going to check that out.

busybe wrote: ↑ Yes, same here and hence posted the question. But as couple others have posted here wait for PE to be in certain range to add more...

busybe wrote: ↑ Yes, same here and hence posted the question. But as couple others have posted here wait for PE to be in certain range to add more...


Thank you for your input, it is interesting to learn what millennials think of this as well

asa1973 wrote: ↑ http://forums.redflagdeals.com/investin ... #p28132222

with 5y "normal" P/E for it as 32.7 it's quite fairly valued for now, despite higher the TSX average P/E of ~18.

Quiet good buying opportunity for DI portfolio now, imo

llpresident wrote: ↑ I don't think you can apply that to this stock. This isn't JNJ. The past five years it has a higher P/E because it was growing. The PE needs to adjust for its new reality. There's plenty more room for it to fall IMO