Stock Review: Crest Animation Studios

 

 

THE stock of Crest Animation Studios has seen a wide fluctuation in the past five trading sessions. The stock touched its 52-week high of Rs 129 on September 8 before crashing to Rs 111 in next three trading sessions.

   The stock has gained momentum following the company's restructuring announcement, which will bring more clarity on its consolidated operations. In the next few quarters, the stock may see some buoyancy based on the success of its three new movie releases.

   Crest's scrip has outperformed the broader market in the past one year. Its price nearly trebled, while the benchmark Sensex gained 20% during the period. Under the restructuring exercise, Crest will consolidate all its three subsidiaries with itself. Since the subsidiaries play key roles in the company's operations, the consolidation will present a better picture of its financials. Crest Animation makes animation films, while its US based subsidiary looks after the preand post-production processes.

In the short run, the success of its animation film 'Alpha & Omega' to be released on September 17, could influence its stock movement. It is one of the first three movies, which Crest is scheduled to produce for the US-based distribution company Lionsgates Films.

Crest has floated a special purpose vehicle (SPV) to produce the movies. It owns 17.5% in the SPV. A major benefit of this arrangement is that the company would not only get paid for producing the movies but also have a share in the post-release profits if the movies are successful at the box office.

   Crest's revenue and net profit over the past six quarters do not exhibit a clear trend given the rough nature of its business. Its quarterly revenue has hovered between Rs 6 crore and Rs 14 crore during the period. Going ahead, the SPV strategy holds a promise to boost its performance significantly. It will be, however, a while before investors can see the benefit of this arrangement since it generally takes more than 90 days to ascertain the actual box-office collections of a film.