Vista Group International Ltd [NZX:VGL] [ASX:VGL] provides software and media solutions to the film industry. The company is dual-listed on the NZX and ASX, with a market capitalisation of around NZD 292m.

The firm’s suite of products cover cinema-management software, film-distribution software, box-office reporting, an online cinema guide, and cinema intelligence.

It has been a terrible run for investors as the price has fallen from around $5.80 last year to around $1.26 today.


Why has the [NZX:VGL] [ASX:VGL] share price risen today?


Perhaps the sell-off has gone a bit far? Could the company could now present some value?

  • P/E – price-to-earnings — now sits below 20. Not too bad for a tech/growth-oriented business.
  • P/B – price-to-book ratio — now looks to be around 1.3. A rare low point, signalling the opportunity to buy into balance sheet assets at a low point. Though many of these are likely intangible.
  • Although the final dividend in February was cancelled, the company does have a history of sharing profits with shareholders.
  • Historic net margins of 8-9% are not exciting, but not terrible either.
  • The business thankfully carries low debt, around 19% long-term debt-to-equity.
  • The stock’s beta at over 2 suggests it will tend to move much more than the overall market.
  • Vista’s share price is now at a 6-year low.
  • While coronavirus has been brutal for the global cinema industry, the upcoming half-year results (due for announcement on 27th August) may show some green shoots. Or not…

There are warning signs.

Coronavirus has impacted the business badly.

  • A capital raise of $65m was carried out. Though they did seem to get that away with support from existing shareholders at the low price of $1.05 per share back in April.
  • The CEO and company directors reduced their remuneration by 30%, and the senior management team 25%.
  • 80% of staff accepted reduced hours for reduced pay.
  • The agreement to acquire a further 14.5% stake in Vista China was terminated.
  • Last week, substantial holder Harbour Asset Management sold down their stake from around 7.4% to 6.3%.


Where could Vista Group go from here?


It is rare to see a growth-oriented software company available at some value.

However, the question remains whether Vista can rebound as cinemas around the globe open again. The cinemas themselves will need to rebuild patronage. While there may be some period of pent-up demand, there is also the risk that consumer habits have altered during lockdown.

As a child of the ‘80s, I well remember the swings in the cinema theatre industry.

  • First, they were in a perilous position, with the advent of widespread video rentals against their high cost of admission.
  • Then, with blockbusters like the Star Wars series and ET, the big screen staged a comeback.
  • More recently, premium cinema experiences such as 3D, Gold Class, and more sophisticated food and beverage options have helped boost the experience and demand.

It is not an industry with a consistent tailwind, in my view.

It comes in waves and depends on innovation in the film industry itself. Now we see a plethora of other viewing options, in the form of low-cost subscriber television. And more and more people with their own home cinemas.

So I’m not convinced there’s enough of a long-run growth story to support even the current P/E. But I could be wrong. Vista has surprised before with impressive, recurring revenue levels. And it could do so again.

I love the experience of the big screen. These bastions of joy and excitement ought to always be with us. And they are ripe for increasing levels of automation and efficiency — which Vista provides.

Cinemas were previously showing surging demand in China. Whether they will rebound worldwide remains the question. As does Vista’s ongoing ability to capture growth.

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Simon Angelo
Editor, Wealth Morning