Swot Cinemax

Cinemax India Limited

LINO LAWRENCE

INTRODUCTION 

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Company was incorporated on May 22, 2002 under the Companies Act as Cineline Entertainment (India) Private Limited to primarily carry on the business of building, owning, and operating Multiplexes, Theatres and entertainment centres The name of company was changed to Cinemax Cinemas (India) Private Limited on December 23, 2005.

SWOT ANALYSIS

STRENGTHS 

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The company is focused in increasing multiplexes across the country with close to 100 screens in the next couple of years from the current 33 screens. This will increase the seat size by 3 times. • The biggest strong point for the company is the current location of its theatres. They are mostly centrally located. Also, unlike its competitors, they have 8 properties with 7 in Mumbai giving free rental cost (only opportunity cost involved). • The company has a strong experience in building and construction. Also, there is a brand of 'Cinemax' to be considered. I do not know if can be translated into revenues. They have a premium theatre too. The utilisation of this could probably indicate the pricing power for the company. • The company's average ticket size is still above Rs. 100 but with the introduction of cheaper tickets, this is bound to reduce.

WEAKNESSES  

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High dependence on distributor for showing films in every theatre and for every film. The biggest weakness for any investor, which is mentioned rightly in the risk factors is the capital structure. It is so unfair for the retail investor. The bonus issue last year has diluted the earnings in a very big game. Further, there is also an issue of a preference share issue at no cost. This has diluted the earnings even further. The promoters have been investing in multiple business' streams. This is an area of concern as it looks like the promoters' are willing to enter into many areas with a motive of profit. The promoters have more than 25 different companies, partnerships etc and only 4 are operational. There are too many construction/building companies. I do not understand the existance of such companies. Alternate mediums like DTH, DVD or VCDs can become popular making the business unattractive.

Contd.. 

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Existing competition is with the largest player with a strong backward integration. In this level of competition, efficiency or utilization rate is one of the key parameters for success. There is no strong pricing power with any of these competitors. Given, that they can't reduce the price to a 'non multiplex' rate, the downside pricing to increase volumes is lost too. Also, the competitors are expanding very aggressively. Incase, they are represented in most areas, specially in prime areas, that Cinemax is operating, this can lead to loss of business. Currently, the projection medium is traditional. Newer digital forms can force the company to incur substantial capital expenditure. The issue size exceeds the current networth by 5 times. That is a lot of funding under the present capital structure..

OPPORTUNITIES 

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There is a big demand for theatres across the country given the poor quality currently in existence across places. Also, most theatres are willing to open in Sec B and C cities and move into small towns too. They are willing to work on different model for pricing tickets depending on time/day The contribution of Multiplexes has been increasing constantly and is close to 20%

THREATS 

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Success of theatres are movie specific and this can tilt towards failure with poor movie scripts. Alternate sources of entertainment such as DTH, DVD can lead to lower sales. Removal of entertainment tax benefits can risk profitability if lower pricing power is not passed to the customer.

Regarding the share price  

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Share price is at Rs.39.15 on 18/12/08 The share price of the company is showing a downward trend for the past one year It dipped to Rs.39 from Rs.179 in a period of one year.

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