Q: Hi 5i,
Concerning the CGX recently announced sale of Player One Amusement Group...Do you consider this positive or negative for the company and what are your expectations for this company, are they really as bad as share price seems to suggests?
Share price is not far off Covid lows when business was zero...Are they effectively managing increased interest rates cost on current debt or is that a big ;problem also.
Current longtime shareholder pre-covid and trying to make decision hold or sell, my time line is 2 year time frame.
Thx
Concerning the CGX recently announced sale of Player One Amusement Group...Do you consider this positive or negative for the company and what are your expectations for this company, are they really as bad as share price seems to suggests?
Share price is not far off Covid lows when business was zero...Are they effectively managing increased interest rates cost on current debt or is that a big ;problem also.
Current longtime shareholder pre-covid and trying to make decision hold or sell, my time line is 2 year time frame.
Thx
5i Research Answer:
The main issue is debt. CGX has $1.9B in debt and other obligations, and even with theatres back open 12-month cash flow was only $200M. Interest expense in the last 12 months was $149M, up from $122M in 2022. Higher rates are certainly having an impact. The asset sale helps, but at $155M doesn't really dent the debt that much. CGX does have some 2024 obligations so it helps in the short term. The stock is cheap, but EPS is expected to fall off sharply next year. With nearly all cash flow going to interest payments, we think the risks are too high here for any level of comfort.