Reading (RDI) has enjoyed quite a run since the beginning of the year, with its stock going from the lower $4 range to the mid $5s. Much of this move has been fueled by a huge bull run in the entire cinema segment, as the box office is up almost 20% year over year and AMC theaters was just bought out at a very nice multiple by a Chinese conglomerate.
With such excitement over the cinema segment, it’s easy to forget that a huge piece of their value comes from their real estate segment.
And that’s what made this release of highlights from their annual meeting so interesting.
Reading disclosed that they had recieved an offer for 2 of their NYC properties valuing them at $100m dollars.
Now, Reading did disclose the offer was “unacceptable”, so it may have contained such crazy provisions that it was actually worth much less than $100m.
But they also disclosed “several” proposals of $40-45m for one of their NYC properties.
Remember, RDI’s current market cap is ~$125m and their EV is less than $350m. Their cinema segment could easily be worth more than $250m (please see previous posts for how to arrive at that valuation). Combine the cinemas w/ the two NYC properties, and at today’s prices you are basically getting all of RDI’s other properties (book value over $150m, and market value very likely at least worth $200m) for free.
I continue to think the stock is deeply undervalued, with several catalysts for value realization- NYC properties getting sold, Burwood potential sale, or even a competitor potentially looking to buy the cinema segment.
Disclosure- Long RDI
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