Wunderlich Maintains Rating on Regal Entertainment, Perceives Risks To 2014 Estimates

In a report published Monday, Wunderlich Securities analyst Matthew Harrigan maintained a Buy rating on Regal Entertainment Group RGC, keeping its $28.00 price target.

According to the report, Wunderlich analysts remain favorable disposed toward the exhibitors given their unique ability to monetize and market new films. However, risks to higher end early 2014 estimates are perceived.

“We are revising Q4 2013E sales to up 3.8% (from up 3.2%) to $750.8mm, but now look for a 9.1% decline in adj. EBITDA to $138.5mm vs. a prior down 6.5% estimate,” the report said. “Regal's Q4 ended on Boxing Day (12.26), with industry receipts down about 1.4% on an equivalent period basis. Q4 results are also affected by a near 20% 3D/premium screen component vs. just 14% in 2012.”

Some highlights from the report included:

-”Given lower rent expense, sometimes smaller boxes than AMC, and lower financial leverage Regal has a more moderate risk profile that emphasizes cash generation rather than new sales.”
-”Regal added 814 screens comparatively recently through the Great Escape and Hollywood Theatres acquisitions, with prospects for further accretive acquisitions.”
RGC closed Monday at $19.46.