Broker snap: Cineworld forecasts to fall after competition ruling, says Panmure

8th Oct 2013 09:24

Panmure Gordon said it expects a reduction in consensus forecasts for Cineworld after the Competition Commission (CC) ruled that three cinemas must be sold due to the acquisition of City Screen.The CC on Tuesday confirmed its provisional findings that were published in August, saying that the deal could lead to a "substantial lessening of competition in the three areas - Aberdeen, Bury St Edmunds and Cambridge - where Cineworld and Picturehouse face limited competition, and that this could lead to higher prices for local cinema goers".Cineworld said it would "reluctantly" dispose of the local Picturehouse cinemas in both Aberdeen and Bury St Edmunds, but is still evaluating its options in Cambridge.Panmure analysts said they expect the group to sell the three cinemas for around seven times earnings before interest, tax, depreciation and amortisation (EBITDA) or around £7m over the coming months. "The group should issue a trading update in the week commencing October 21st and we expect a downbeat assessment given that industry weekend box office revenues have fallen around 2% in the group's second half trading period to date. "Fourth quarter trading will be challenging given the group faces difficult comparatives reflecting the release of the Bond movie in the period last year. We forecast a 10% decline in admissions during fourth quarter resulting in the weakest year for admissions since 2008."Consensus forecasts are for around £75m of EBITDA in 2013, though Panmure's £74.1m estimate is due to its cautious view on admissions. While the broker still expects progress year-on-year, it foresees consensus predictions for 2014 being reduced to around £80m to reflect the sale of the three cinemas.The broker maintained its 'sell' rating and 260p target price for the stock, saying that despite the recent share-price drop - it has fallen by around 14% since the start of September - it is "too expensive given the trading backdrop".The stock had inched 0.12% higher to 369.95p by 09:27 on Tuesday.BC