[Click eStock] "CJ CGV, Q1 Operating Loss Expected... Target Price Down"

[Asia Economy Reporter Minji Lee] Ebest Investment & Securities maintained a buy rating on CJ CGV on the 6th, despite expecting an operating loss in the first quarter due to the impact of the novel coronavirus infection (COVID-19), and lowered the target price by 9% to 40,000 KRW.

The CGV Sungshin Women's University Entrance branch in Seongbuk-gu, Seoul, confirmed as a location visited by the fifth confirmed case of the novel coronavirus infection, has suspended operations for the second consecutive day on the 2nd. Photo by Hyunmin Kim kimhyun81@

The company forecasts first-quarter sales of 298.8 billion KRW, a 35% decrease compared to the same period last year. An operating loss of 1.5 billion KRW is expected, marking a turnaround to a deficit during the same period.

Hyunyong Kim, a researcher at Ebest Investment & Securities, explained, “The sharp decline in scale is due to a 45% and 80% plunge centered on the Korean and Chinese markets, which were directly hit by COVID-19,” adding, “The three countries of Turkey, Indonesia, and Vietnam have shown limited impact from COVID-19, thus playing a role in offsetting the massive losses in Korea and China.”

Regarding Turkey’s total return swap (TRS), it is expected that additional loss recognition will be limited unless there is a sharp depreciation of the Turkish lira exchange rate. The remaining possible amount for additional loss recognition is 50 billion KRW. Upon maturity in April next year, it is expected to secure a 35% stake in the Turkish subsidiary through a cash transaction worth 360 billion KRW. The subsidiary’s initial public offering (IPO) is being pursued with Turkey targeted for the first half of next year. An IPO for the Northeast Asia subsidiary is planned for 2022?2023.

Researcher Hyunyong Kim stated, “Turkey, Indonesia, and Vietnam have been less affected by COVID-19, so the negative impact on second-quarter earnings will be limited,” and added, “Since the operational damage caused by COVID-19 is judged to have passed its peak, we maintain the buy rating.”

This content was produced with the assistance of AI translation services.