The Globe and Mail reports in its Thursday edition that
Canaccord analyst Aravinda Galappatthige is keeping his "speculative buy" on Cineplex ($8.58). The Globe's David Leeder writes in the Eye On Equities column that Mr. Galappatthige, however, lowered his share target to $11 from $12. Analysts on average target the shares at $14.19. Cineplex has proposed a $275-million convertible debenture offering. Mr. Galappatthige says in a note: "Based on our revised estimates, which assume a successful take-up of the base $275-million (at $10 strike price), Cineplex's net debt levels ease back to 2.4 times net debt (excluding converts)/LTM [last 12-month] EBITDA by year-end 2021, well below the revised down covenant for that point in time of three times. This, in our view, should provide adequate room for Cineplex to navigate the company back to stability by the back-end of fiscal 2021. We note, however, that our F2021 forecasts assume a 15-per-cent decline in box office over 2019. While a moderate variance to this can be managed due to the flexibility on the opex front, a more serious 30-per-cent box office decline (vs 2019) could potentially cause the leverage ratio to rise close to three times even as of Q4/21."
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