Featuring only 74 MovieStocks eligible to trade ('Nerve' IPOs Mar 27), LGFX is relatively boutique in scale when compared with other HSX Movie & Studio Funds. Despite this, after achieving 10% monthly returns in January & February, Lionsgate has increased in value by more than 20% so far this month.
I recently placed a series of bets (H$44.4m in total) against the 'Divergent' franchise & remain short for the following reasons;
- Reported Thursday night preview numbers for DVRG2 were 16% off from DVRGN
- While DVRG2's estimated OW internal multiplier of 2.54 is slightly better than the 2.40 actual figure achieved by DVRGN, the film sold fewer tickets due to 3D surcharges this year
- Despite an action-orientated emphasis during pre-release publicity, DVRG2's OW didn't appeal to new demographics
- DVRG2 has received lower RT critic, RT audience & CinemaScore results than DVRGN
- DVRGN's delist price was H$124.76 (H$26.44 below the adjust price of H$151.20)
- A post-adjust decline in price for DVRG2 might affect DVRG3 & DVRG4 sentiment
- 'Allegiant' already features a controversial ending & -- similar to the 'Hobbit' & 'Hunger Games' franchises -- splitting the book in half may not lead to theatrical gains Stateside for either the penultimate or final chapters.
Accordingly, after deducting 3.5% total transaction costs, I estimate the Fund will generate a 6% (H$2.5m+) cash return from this investment strategy over the next three weeks.
The following LGFX MovieStocks are currently scheduled for release prior to delist in early September;
'Last Knights' (LSKNT) Apr 3
'Beyond the Reach' (REACH) Apr 17
'Child 44' (CHI44) Apr 17
'The Forger' (FORGR) Apr 24
'The Age of Adaline' (ADALN) Apr 24
'Maggie' (MAGIE) May 8
'Where Hope Grows' (WHOPG) May 15
'Love & Mercy' (LVMRC) Jun 5
'Mr. Holmes' (ASLTM) Jul 17
'The Vatican Tapes' (VATAP) Jul 24
'Criminal' (CRIMN) Aug 21
It is to be hoped this modest slate (with some breakout potential) can be bolstered by last-minute acquisitions or listed projects in the 'wrap' phase. Due to a number of other low & mid-priced MovieStocks, I remain firm on the Fund's H$75 target delist price. I also believe Lionsgate is going to announce new powerhouse brands to replace the 'Hunger Games' franchise & trust these developments will lead to more IPO opportunities in future.
15-May-2007 (aka Qix)
