Q2 2013 Disclosures Affirm Reading International Remains On Track Yet Undervalued

Recent quarterly and 8-K disclosures from movie theater operator and real estate developer, Reading International (RDI), illustrate the company’s continued operational growth and movement toward redeveloping and monetizing some of the company’s substantially undervalued real estate. Despite this progress, and the resulting substantial reduction of Reading’s net debt, RDI shares have appreciated only modestly over the past year. Thus, the disconnection between Reading’s stock price and the company’s increasing cash flows and lower net debt levels has widened. This disconnection provides an inexpensive entry point for investment into Reading and its $258MM of LTM revenues plus 330.5-acres or almost 14MM sq ft of developable real estate that has not yet generated any revenue or sales proceeds.

Despite the company’s fairly consistent delivery of operating performance, its large cinema market shares in Australia (#4), New Zealand (#3) and the United States (#11), and its stock, a Russell 2000 Index component for over a year, Reading International lacks research coverage from any sell-side entertainment, consumer non-durable, or real estate industry analyst.

Reading’s business activities extend over three countries and two separate (but synergistic) industry sectors, cinema exhibition and real estate. This diversification often creates analytical complexity too daunting for many analysts. However, for a diligent and skilled analyst, Reading’s extensive SEC disclosures, combined with information available from resourceful Internet research, provide a value creation roadmap that I believe Reading has not strayed from. Perhaps Reading’s recentplans to present its story for the first time (Reading did make a “trial” presentation at a very small conference in 2011) at this month’s Midwest IDEAS conference in Chicago on August 27, 2013 and roll-out of new investor web pages may attract some initial coverage.

Reading trades at a substantial discount to the company’s intrinsic asset value and at a far lower multiple of stated book value/share than any of the three larger US publicly-traded theater exhibitors; Regal Cinemas (RGC), Cinemark Holdings (CNK) and Carmike Cinemas (CKEC). As Reading continues to grow its sustainable cash flows and unlock the appreciated value in its geographically diversified real estate holdings, investors will eventually narrow the substantial “value gap” that presently exists in RDI shares.

http://seekingalpha.com/article/1630942-q2-2013-disclosures-affirm-reading-international-remains-on-track-yet-undervalued