Loop Capital Says AMC Should Trade At A Premium To Regal

In view of the recent acquisitions made by AMC Entertainment Holdings Inc AMC, the company’s stock should trade at a premium to that of Regal Entertainment Group RGC, Loop Capital’s David W. Miller said in a report. He initiated coverage of AMC with a Buy rating and a price target of $35.

Premium Deserved

AMC announced the acquisition of Carmike Cinemas, Inc. CKEC on March 3 and the acquisition of Odeon-UCI [the largest operator in Europe] on July 12. The former should take AMC’s domestic screen count to as high as 8,380, while the latter should take the company’s international screen count to as much as 2,236, analyst Miller noted.

Taking into view the supplier power associated with the acquisitions, AMC’s stock deserves a premium to that of Regal.

Carmike Acquisition

AMC has offered $30 per share for Carmike, valuing the latter at $1.11 billion in terminal value, including the assumption of $454.7 million in debt.

“At closure, AMC will pick up an additional 275 theaters and 2,930 screens, mostly in outer rim areas like Peoria, IL and Modesto, CA, but also CKEC's "Kabuki" assets, which include most of the Sundance theaters which CKEC acquired just about one year ago,” Miller wrote.

Europe Expansion

AMC has acquired Odeon-UCI Cinemas, the leading market share player in the UK and in mainland Europe. With this deal, AMC joins Cinemark Holdings, Inc. CNK as “the only two U.S.-based exhibitors with international exposure, which we believe is important, as really, that’s where the organic growth is,” the analyst commented.

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