CJ CGV shares surge 38% on strong Q2 results, post-pandemic recovery

[Courtesy of CJ CGV]

CJ CGV Co., South Korea’s cinema chain, is seeing signs of recovery in its stock price on the back its strong second-quarter performance after its plan to sell shares triggered investors to sell.

According to the Korea Exchange on Sunday, CJ CGV’s stock price has surged by 37.58 percent this month. Earlier on Friday, the ex-rights date, the company’s stock rose by 9.83 percent, closing at 8,940 won ($7), marking a 12 percent increase from 7,993 won at the close on the day after the capital increase announcement.

The cinema chain’s stock price experienced a period of weakness after the capital increase announcement. The market perceived the company‘s financial soundness negatively, as 67 percent of the general public offering funds were disclosed to be for debt repayment. On Thursday, the company announced its first-round offering price for the rights at 5,890 won, a 22.8 percent decrease from the initially planned 7,630 won. The total amount of funds to be raised subsequently decreased to 440 billion won from the expected 570 billion won.

However, the company’s announcement of its positive turnaround with an operating profit of 15.8 billion won on July 20 changed the trend. Following this announcement, the company’s stock price started to rise and has increased by 47 percent compared to the lowest point of 6,079 won earlier this month.

Securities firms also have a positive outlook on CJ CGV. Daishin Securities Co. expects the company’s operating profit to recover to 66.2 billion won, 54 percent of the 2019 figure, projecting a return to profitability after four years. Daishin Securities has also forecasted that the compay’s operating profit will increase to 150 billion won next year, reaching 120 percent of the 2019 level.

“The normalization in the movie production environment and increase in series releases are leading to a rapid recovery in audience numbers and revenue,” said Kim Hee-jae, an analyst at Daishin Securities.