Forum Archive Index - May 2000

[Phil Eriksen <phil@acepay.co.nz>]

nick wrote:
> 
>        I have spent some time analysing Force corp in the last few days.
>  I have spoken to a couple of brokers also, neither could give me a reason
> why i should not buy.

Hi Nick,

I bought Force last week (at 43c) and would loved to have been able to
get more at 43c or less.  In fact, I admit to cringing when Force came
no.1 on that list that someone here did recently - i'd rather
Sharechatters sell em, not buy em :)

Given the current state of the market i'm not willing to even slightly
overpay for a share so i'm not one of the buyers on the board at 45c. 
My initial reason for buying now as opposed to any time in the last 12
months is I believe they've been oversold because of the breakdown of
the Ihug merger.  I've long kept an eye on them but this "sentiment"
issue combined with general market weakness meant "buy em one day"
became "now".

Since you have covered the positives already, heres a few possible
negatives to consider :

It is possible that the dividend may not be maintained.  From what I can
gather (and I'm not sure of this point) Force would need to pay for the
rights to screen movies in US dollars, making them more expensive as of
late.  Someone able to confirm?  Also, the Ihug distraction would of
cost them a bit of money (lawyers etc) and it is amazing what a loss of
focus can do to a business, even one as solid as Force.  That said, I
didn't buy Force for the dividend, although I expect it to continue to
be attractive.

Peter Francis.  I'm sure some investors would steer clear due to the
history of the Chairman.  Having publicly admitted to being a
technophobe, some could question the "get rich quick" scheme that was
merging with Ihug to be a flashback to his past.  

I've often heard Force referred to as a "no growth" company in a go
nowhere industry.  As your figures show, that is not entirely true.  It
is true that New Zealand already has enough cinemas, but this sure isn't
a problem with me.  I'd much rather a company that has a dominant
position in a mature industry selling at a low price than a company with
sales growing 500% (ie from nothing to next to nothing) selling at an
outrageous multiple.  That said, there is limited growth in the New
Zealand market, which must be seen as a negative.  In my eyes tho, the
offsetting positive is the barriers to entry created by the unexciting
prospects coupled with Force's market position.

The future of the movie business.  A case could be made for Force (and
all other industry players) to be threatened by the internet.  While
this is *possible* and could happen *one day* I don't see it as a medium
term threat.  So far, we have had movies on tv, Sky, videos, DVD and now
the internet.  While every movie i've ever seen at a Force cinema could
have been viewed on video (or in some cases, downloaded for free from
the internet) I neither watch videos, nor use the internet for this
purpose.  I go to quite a few movies, but have very little interest in
what is on the screen.  I go because it gets me outside (a rare thing
indeed!) and I like popcorn.  As the internet invades our life further,
I don't see it replacing things such as movie theatres (at least for
now).  Rather, it will become even more important to "get out", get
away, and socialise.  Finally, the internet can be used to help "old
economy" businesses like movie making and theatre owning.  Look no
further than The Blair Witch Project for evidence of this.  Locally,
hoyts.co.nz will email you weekly to tell you whats on at your local
cinema. The internet is full of celebrity information, fan sites, movie
scripts etc.  All of this enhances the profile of the movies and the
actors.  The stage, however, hasn't changed.   

In summary, the 4 very minor question marks are : future dividend yield,
Peter Francis, growth prospects (esp in NZ) and the implications of the
internet.  All said and done tho, I bought em and hope to get more (at
the right price).

Cheers,
Phil

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