© Reuters AMC Leisure (AMC) overvalued, could must ‘enhance shares by 230%’ to deleverage, Citi resumes at Promote
By Vlad Schepkov
Citi analysts resumed protection of AMC Leisure Holdings (NYSE:) (NYSE:) with a “Promote” ranking and $1.60 Worth Goal, as they imagine “AMC’s widespread fairness is overvalued at prevailing ranges” attributable to persistent dilution dangers.
Of their newest notice, the analysts notice that the struggling cinema chain’s “web leverage remained elevated in 2022” and sees the corporate’s skill to deleverage as “primarily contingent on: 1) the restoration within the US field workplace, and a couple of) the agency’s skill to boost capital by way of fairness issuance.”
Whereas they see constructive developments on each fronts – Citi initiatives “the US field workplace to develop ~25% in 2023”, and the pending mixture of AMC widespread shares and APE items, and the ten:1 reverse cut up “could enhance AMC’s skill to boost capital” – the analysts nonetheless see the necessity for enormous dilution within the close to time period.
“With one share class, AMC hopes the ~35% common low cost between AMC widespread inventory and the APE items could shut… If the newly mixed class share converges at AMC’s prevailing widespread fairness worth, we estimate AMC’s share depend would wish to extend ~77% to repay all excellent debt. If the worth is nearer to the prevailing APE unit worth, AMC would wish to extend shares by 230% to repay its debt” – Citi estimates.
The analysts thus see “fairness worth between ~$1.00 to $2.00 per share at ~7.5x 2024 Adj. EBITDA” as they resume the shares at “Promote” with a $1.60 Worth Goal.
AMC widespread shares closed at $4.34 yesterday. APE items completed the day at $1.44.