Reading International: Strong Q3 Earnings

| About: Reading International, (RDI)
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Reading International (NASDAQ:RDI) reported good quarterly results late last week.

The Q3 earnings full press release may be found on RDI's website.

I note the following salient points:

  1. Since the US dollar skyrocketed last year during Q3 08, this year’s Q3 09 was the final quarter of negative yr/yr currency headwinds for Reading. Despite those headwinds, Reading’s operating results were good. In local currency, Reading’s Australia and New Zealand cinema segments enjoyed continued revenue growth, in the case of Australia, growing better than US industry box office trends. Global box office releases for the remainder of 2009 and early 2010 (summer in Aus/NZ) look appealing. Going forward, for at least the next few quarters, yr/yr currency impacts on Reading’s operating cash flow, should finally become a tailwind.
  2. Good operating results and the quarter’s foreign currency improvement catapulted Reading’s book value/share to over $5. We believe this $5/share book value still greatly understates the current fair value of Reading’s Australian, New Zealand, New York and Chicago real estate, held for more than a decade that has since been upzoned and some developed. Thus, we feel true book value is well more than $5.
  3. Reading maintains substantial liquidity and an interest in accretive acquisitions of cash flowing assets. Sept 30 cash and marketable securities balances were $23.1MM and Reading has a combined $26.6MM of undrawn credit availability on its Australian and New Zealand Credit facilities. The company has filed of a universal shelf registration statement for up to $100MM of debt and warrants for debt and “units”, etc in addition to equity to enable Reading to act quickly to structure and finance growth transactions.

Other items of note:

  1. The Malulani litigation settlement gain, reported below-the-line as other income, is actually a recovery of several quarters of above-the-line SG&A litigation expense. “Apples to Apples” analysis would call for this current quarter’s gain to be viewed as part of operating income.
  2. Prior year 2008 revenues included multiple quarter lump sum recognition from completion of screen advertising revenue contract in Q3 2008.
  3. During the quarter, Reading re-listed both classes of its common stock from the AMEX to the NASDAQ exchange, maintaining the RDI symbol and adopting the RDIB symbol for the Class B voting stock. The RDI shares trade as a component of both the Russell 2000 small cap and Microcap indices.

Disclosure: Long RDI and RDI class B