The document provides an analysis of Cinemark Holdings (CNK) and the motion picture exhibition industry. It summarizes CNK's business model, which derives revenue from film licensing, ticket sales, and concession sales. It finds that CNK has a competitive advantage through its international reach in Latin America. While the overall industry faces risks from increasing online competition, the analysis recommends buying CNK due to its strong position within a stagnant industry.

1. Finance & Investment Club
Technology, Media, and Telecommunications Sector
Motion Picture Industry
December 3, 2014
Investment Associate: Elan Plotkin
Cinemark Holdings

2. 22
Industry Definition
 Industry participants provide movie exhibitions of top new releases to audiences in a
theatre setting featuring the latest digital technology
 CNK and its competitors provide the best movie viewing experiences to customers; key
part of competition is providing highest quality/size movies
 Competitors such as CNK compete in providing the best theater experiences
 Key to industry success is customer desire for experience unattainable at home
 Higher quality viewing, social event, traditional experience
Industry Competitors
AMC:
NYSE
CNK:
NYSE
RGC:
Nasdaq
CKEC:
NASDAQ
IMAX
18%
AMC
19%
CNK
32%
CKEC
6%
RGC
25%
Industry Breakdown
IMAX AMC CNK CKEC RGCIMAX:
NYSE

3. 33
BEGIN COMPANY ANALYSIS
Company: CNK (NYSE: CNK)
Investment Recommendation
CNK Business Model
Film Licensing
3 Major Revenue Streams
Competitive Advantage
Trends & Risks

4. 44
Investment Recommendation
CINEMARK HOLDINGS: Strong Company in a Stagnant Industry
Recommendation BUY
Current Price 38.79
1 Yr. Target Price 44.98
% Upside / Downside 15.9%
Source:
Marketwatch

5. 55
CNK Business Model
Film
Licensing
Theatre
Exhibition
Ticket Sales
(Online, POS)
(64%)
Concession
Sales
(32%)
Miscellaneous
(4%)

6. 66
CNK Business Model: Film Licensing Explained
 Domestic Market
 Corporate Film Department negotiates with film distributors comprised of traditional
major film companies, divisions of major film companies, and independent film
distributors
 Book films, negotiate film licensing zones
 Free Film Zones: films can be booked without regard to film bookings of
other exhibitors in the area
 Competitive Zones: distributor allocates movies based on demographics,
conditions, capacity, potential of theatre, etc.
 92% of theatres in U.S. are located in free film zones  company selects films it
believes will be most profitable
 International Market
 Negotiate with major/local film distributors
 Films not allocated to single theatre in geographic zone  simultaneous
 Of 1106 screens, 87% have no direct competition from other theatres

7. 77
CNK Food and Beverage Revenue Stream
 Concession Sales: 2nd largest source of revenue
 32% of total revenue
 Much higher margin than admission sales
 Plan to create lobby bars and VIP lounges
 Changing theatre experience
 Multi-course meals during movie
 Promotions play large role in attracting buyers
 Loyal patrons receive discounts  customer retention is key

8. 88
CNK Pre-Feature Screen Advertising Revenue Stream
 Part of National CineMedia (NCM) pre-feature entertainment program that provides
advertising opportunities
 Receive monthly theatre access fee for participation in network
 Receive mandatory quarterly distributions of excess cash from NCM
 Similar partnerships established internationally
 Focus on working with network of advertisers rather than singling out companies to enter
contracts with  streamlined process

9. 99
CNK Ticket Sales Revenue Stream
 Online and Mobile
 Purchase advance tickets online through both corporate websites and third party
sites such as Fandango
 Can also purchase through mobile and tablet applications
 Allows customers to avoid box office lines
 Can print our scan digital barcode conveniently
 Point of Sale System
 Provides management with real-time admissions and concessions revenue data
 Real-time seating and reserved seating used to counter overbooking
 Track revenue by film or by food/beverage type

10. 1010
CNK Competitive Advantage: International Reach
 Dominate Latin/South American Market (Brazil, Argentina, Chile, Peru,
Colombia)
 482 Theatres
 5,563 Screens
 Growing economy, population, middle class emergence, 3D film
appeal
 Theatres dominate in 13 Countries
 Increasingly important component of box office revenues generated by
Hollywood films
 $23.9 billion (69%) of 2012 total worldwide box office revenues
according to MPAA
 $783.1 million in international revenue = 29.2% of total revenues
(2013)
 Enter Bolivia in 2014
 Enter Paraguay in 2015

11. 1111
CNK Competitive Advantage: International Reach
0
200
400
600
800
1000
1200
1400
2009 2010 2011 2012 2013
International Theatres & Screens
Theaters Operated # Screens Operated
0
20000
40000
60000
80000
100000
120000
2009 2010 2011 2012 2013
Total International Attendance
3.3% CAGR in # Theatres
8.5% CAGR in Attendance

12. 1212
Recent / Highly Relevant Trend: Per Capita Disposable Income
 Attendance heavily reliant on household disposable income
 Expected to increase in 2014  BIG opportunity for industry
 Private Wages and Salaries showing improvement
 October: $18.8B Increase
 September: $13.9B Increase
Source: IBISWorld

13. 1313
Increasing number of K-12 students: Diving into 2010 Census
 Adolescents 17 and under contribute to over 25% of industry revenue
 Many movies targeted toward younger audiences
 Popular social outing among teenagers
 2010 Census shows:
 2.6% increase in number of children aged 18 and younger from
2000
 Underestimated statistic for movie exhibition industry
Source: US Census Bureau

14. 1414
Trend Flooding Industry With Risk: Online Competition
 Largest substitute to theatres is internet competition
 Netflix, Amazon, Hulu, and other streaming sites
 Access to high-speed internet connectivity growing at 19.8% annualized
rate
 Rise of internet-enabled TV, tablets, smartphones
 In tandem with rising ticket prices  poses largest threat to industry

15. 1515
Other Risk Factors
 Business depends on film production and performance
 Potential deterioration of relationships with large film distributors
 7 major distributors account for 86% of U.S. Box Office revenues as
well as 44 out of top 50 films in 2013
 Intense competition: price competition, capacity, visual/sound quality,
customer service
 Shrinking video release windows
 Time between theatrical release and when films reach consumers at
home
 Long-term lease and debt obligations
 $1,833 million in long-term debt obligations,
 Increasing access to on-demand films at home
 Will theatres survive or sink with new companies like Netflix?

16. 1616
BEGIN TECHNICAL VALUATION
U.S. Box Office Analysis
Revenue Metrics – Screen Perspective
Company Comparables
DCF
WACC Calculation

17. 1717
U.S. Box Office Data Put Into Perspective
Year Box Office
Revenues
Attendance Ticket
Prices
2008 9.6B 1.34B $7.18
2009 10.6B 1.42B $7.50
2010 10.6B 1.34B $7.89
2011 10.2B 1.28B $7.93
2012 10.8B 1.36B $7.96
2013 10.9B 1.34B $8.13
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2008 2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013
Domestic Market
U.S. Box Office Revenues Attendance Avg. Ticket Price
U.S. Versus CNK US Market CNK
Rev CAGR ’10 – ’13 0.90% 7.81%
Attendance CAGR ‘9 – ’13 (1.44%) 1.77%

18. 1818
Important CNK Statistics From a Screen Perspective
4800
4900
5000
5100
5200
5300
5400
5500
5600
2009 2010 2011 2012 2013
Avg Screen Count
400,000
410,000
420,000
430,000
440,000
450,000
460,000
470,000
480,000
490,000
2009 2010 2011 2012 2013
Revenue per Avg Screen
CAGR ‘9 – ’13 = 3.37%
CAGR ‘9 – ’13 = 4.42%

19. 1919
Company Comparables
Company
% of 52-
Week High
Market
Cap
Net
Debt/EBIT
DA
LTM
EBITDA
Margin
Return on
Assets
Return on
Equity Revenue CAGR
LTM
P/E
LTM
EV/EBIT
DA
2011-
2013
2010-
2013
IMAX 98.83% 2.14B 0 31.1% 8.2% 14.2% -3.81% 2.72% 47.4 23.04
Cinemark 99.40% 4.17B 3.62 20.6% 3.9% 14.5% 8.49% 7.81% 26.29 10.57
AMC 98.47% 2.57B 5.11 13.9% 8.7% 26.9% 4.40% 4.38% 7.75 11.55
Regal 99.31% 3.57B 4.86 16.8% 3.3% -3.5% 6.55% 2.63% 43.4 12.26
Carmike
Cinemas 82.19% 0.726B 4.30 15.5% 4.2% -1.2% 15.2% 9.47% N/A 10.32
High 99.40% 4.17B 5.11 31.1% 8.7% 26.9% 15.24% 9.47% 47.40 23.04
Median 98.83% 2.57B 4.30 16.8% 4.2% 14.2% 6.55% 4.38% 34.85 11.55
Mean 95.64% 2.64B 3.58 19.6% 5.7% 10.2% 6.17% 5.40% 31.21 13.548
Low 82.19% 0.726B 0 13.9% 3.3% -3.5% -3.81% 2.63% 7.75 10.32

20. 2020
DCF Analysis

21. 2121
WACC Calculation

22. 2222
Investment Recommendation
CINEMARK HOLDINGS: Strong Company in a Stagnant Industry
Recommendation BUY
Current Price 38.79
1 Yr. Target Price 44.98
% Upside / Downside 15.9%
Source:
Marketwatch