[Click eStock] CJ CGV, Operating Loss Inevitable This Year... "Investment Opinion Neutral"

[Asia Economy Reporter Minji Lee] Meritz Securities on the 12th gave CJ CGV a neutral investment rating and lowered the target price by 50% to 25,000 KRW. This decision was based on the expectation of a return to losses this year, considering the ongoing impact of the novel coronavirus disease (COVID-19).

On the 1st of last month, CGV Incheon Airport branch suspended operations due to the impact of COVID-19, resulting in a quiet atmosphere. Photo by Moon Honam munonam@

In the first quarter, the company's consolidated results showed sales of 243.3 billion KRW and an operating loss of 71.6 billion KRW, representing a 47% decrease and a shift to losses compared to the same period last year, significantly missing market expectations.

Researcher Jisoo Jung of Meritz Securities analyzed, "Due to the closure measures to prevent the spread of COVID-19, both domestic and overseas theater sales declined," and added, "Despite efforts to reduce costs such as minimizing personnel, the burden of high fixed costs persisted."

The company decided on a paid-in capital increase worth 250.2 billion KRW on the 8th. The new shares will be issued at a price of 17,950 KRW per share, with 13.93 million shares to be issued (65.9% of the existing shares), planned through a rights offering followed by a general public offering for unsubscribed shares. The funds raised are planned to be used to repay corporate bonds worth 160 billion KRW maturing in the second half of this year and next year. The remaining 90 billion KRW is expected to be used for operational purposes.

Researcher Jung said, "Due to the worsening business situation caused by the COVID-19 crisis, a large-scale capital increase was inevitable," and added, "Considering the capital increase ratio, a stock dilution of about 14.6% is unavoidable."

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