AMC In 'Early Innings' Of Increased Concession And Admission Revenue

Although 2017 would be a transitional year for AMC Entertainment Holdings Inc (NYSE: AMC), there is substantial EBITDA accretion ahead, Wedbush’s Michael Pachter said in a report. He reiterated an Outperform rating on the company, with a price target of $40.

Transition Year

AMC recently completed the Carmike and Odeon-UCI transactions. Pachter expects 2017 to be a transition year, with the company renovating theaters, completing the Nordic acquisition and integrating Carmike and Odeon.

The company seems to be in “the early innings of the implementation of initiatives to increase concessions and admissions revenues through reinvestment in its current asset base, offering a high return on investment opportunity,” the analyst commented.

EBITDA Accretion

AMC reported impressive Q4 results, despite tough box office comps and average ticket headwinds from acquired circuits. “This highlights the strength of AMC’s model, and the positive impact of upgraded seating, concessions, and its expanded loyalty program,” Pachter noted.

The EBITDA estimate for 2017 reflects growth of $390 million, with ~50 percent coming from Carmike and the remaining being split between Odeon and solid box office growth plus synergies. Nordic is also likely to be accretive, although the estimates do not reflect this yet.

The analyst expects AMC to generate EBITDA growth in 2018, driven by “2017 theater upgrades, segmenting of theaters into upscale and mid-tier brands, further cost synergies and growth in average ticket price and concessions.”

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