Just last week, I wrote about a cinema operator looking to borrow $200k for the expansion of a new cinema on Funding Societies platform. Yesterday, Capital Match announced a $100k loan for a very similar borrower. Both borrowers seem to be the same company, Rex Cinemas. If the initial $200k loan was insufficient, Rex (and FS) should have disclosed this in good faith. It hasn’t, so now the important question is just how much does Rex need in total?
Rex Cinema has a 3-hall cinema on Mackenzie Road that screens Tamil and Hindi movies. It is popular with foreign workers, although it recently suffered from bug infestation problem. It responded by undertaking a major renovation. It is also expanding to a new premise at Golden Mile and needs fund to finish its renovation. It appears to have registered with FS for a $200k loan and CM for a $100k loan.
|Platform||Funding Societies||Capital Match|
|Borrower||Cinema operator||Cinema operator|
|Purpose||Working Capital; Expansion||Renovation of new cinema|
Following the debt schedule for the two different loans (and another existing term loan), Rex would need to service $25k per month for the next 12 months. This is equivalent to about $300k in the next one year. Is this doable? Possibly, since 2014 EBIT was over $300k. But in 2015 (ended June) it had to deal with the bug infestation problem, and EBIT fell to $182k. And there is also the risk associated with opening a new cinema – whether there would be enough crowds.
My feel is that servicing the two loans (at FS & CM) is doable provided the bug infestation problem is resolved, and the new cinema is at least cash-flow positive within 12 months. But is $300k sufficient? We do not know just how much Rex needs in total. Its disclosure is disappointing: two separate loans at two different platforms, but for the similar purpose. Will we see another such loan at MS? I hope not.
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