by Martin Chapman

Created on: September 21, 2010

Cineworld operates in an industry which traditionally does well in a recession. Even in the Great Depression Joe Kennedy made part of his fortune through his investments in cinema chains. Cineworld is protected by high barriers to entry and is one of the market leaders among the cinema operators in the UK and Ireland. Management are investing in future growth, including the rollout of digital upgrades across their cinema chain and acquiring flagship locations like the O2 in London. The stock is cheap, pays a nice 5.1% dividend yield and generates significant cash. It continues to trade well with 3-D movies being the newest public attraction.

Cineworld Group plc is the only quoted UK cinema business. The Group currently operates 78 sites (including Aberdeen and Witney, which opened in October 2009 and the acquisition of The O2 cinema in London in June 2010) of which 75 are multiplex sites with five screens or more. Cineworld’s portfolio includes five out of the ten highest grossing cinemas in the UK and Ireland, including the number one and two in Glasgow and Dublin.

The UK and Ireland cinema market continues to be dominated by three major exhibitors; Odeon UCI, Cineworld and Vue. In total they account for over 70% of the total market box office. According to EDI Nielsen Cineworld’s box office market share increased during the 6 months ended 1st July 2010 to 24.3% (2009: 23.5%). Their partnership with Arts Alliance Media to complete the rollout of digital projection facilities across the UK and Ireland was announced on 14th June. The first of the new projectors should be in place in the second half of 2010, with the rollout due for completion within three years. This will help Cineworld capitalize further on 3D films. The company’s shares are listed on the London Stock Exchange and can be found under the Bloomberg ticker CINE:LN

COMPANY MANAGEMENT AND TRACK RECORD

Cine-UK’s first multiplex cinema opened in Stevenage under the Cineworld brand in 1996. Between 1996 and 2004 a further 34 multiplex cinemas were opened under the Cineworld brand. Blackstone Group acquired Cine-UK from a consortium of private equity investors, with the management team retaining a significant proportion of their interests in the business. Cineworld acquired the UK operations of UGC comprising 42 cinemas and business merged with Cine-UK business under the Cineworld brand. The company was listed on the

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