Stock Alert for Seven Arts Entertainment Inc. (SAPX)

Seven Arts Entertainment Inc. (SAPX) is the successor to Seven Arts Pictures plc (PLC), which was founded in 2002 as an independent motion picture production and distribution company engaged in the development, acquisition, financing, production, and licensing of theatrical motion pictures for exhibition in domestic (the United States and Canada) and foreign theatrical markets, and for subsequent worldwide release in other forms of media, including home video and pay and free television.

Share Statistics (21-Nov-11)
Symbol SAPX
Current price $0.51
52wk Range: $0.06-$5.75
Avg Vol (3m): 771,932
Market Cap. 1.11M
Shares Outstanding 2.19M

Source: Reuters.com, SEC Filings.

 

Investment Highlights

Extending gains for the third day in a row, shares of SAPX jumped as much as 54% yesterday to reach an intraday high of $0.63.  Approximately 8.86 million shares traded hands during the session, versus the 10-day average of 831.56 K. The stock has so far reached a 52-week high of $5.75, its 52-week low being $0.06. It is currently trading above its 50-day moving average of $0.38 and below its 200-day moving average of $1.06.

Shares of SAPX have gained 45.0% in the last five days and 31.6% in the last month.  Year-to-date, the stock is down 87.5%.

SAPX earlier this month sent a letter out to its stockholders informing them of its retirement of debt, the strengthening of its balance sheet and recent developments within the business.

As set forth in PLC’s previously filed Form 6-K and subsequently, the Company and PLC have issued about 10 million common shares since June 1, 2011, to retire debt and increase the Company’s stockholder equity. As of October 31, 2011, the Company said it had about 12.55 million shares outstanding. It said certain indebtedness of PLC was not assumed by the Company and will remain an obligation of PLC, which will be administered and liquidated in accordance with English law.

As a result of the foregoing, as of October 31, 2011, but taking into account committed reductions in debt and the elimination on the Company’s balance sheet of PLC’s retained indebtedness, the Company’s indebtedness has been reduced in total by about $10.0 million from the approximate $17.5 million that was reported by PLC as of December 31, 2010.

As a result, SAPX’s stockholder equity or book value has increased from the approximate $3.5 million that was reported by PLC as of December 31, 2010, to approximately $18.0 million as of October 31, 2011, taking into account committed reductions in indebtedness and proposed elimination of PLC indebtedness. Per-share equity was in excess of $1.30 as of November 3, 2011, which also reflected PLC’s earnings for the fiscal year ended June 30, 2011.

SAPX believes several recent developments will have a favorable impact on the Company in the upcoming fiscal year, said SAPX CEO Peter Hoffman.

SAPX earlier in November announced its film distribution joint venture with GFM Films LLC, which was unveiled at this year’s Cannes Festival, has made its first acquisition.   Peter Hoffman and GFM’s Michael Ryan negotiated the terms with Manu Kumaran of Medient for acquisition of worldwide rights to Nick Cassavetes’ new feature “Yellow.” The film has completed shooting and will be ready for release in the spring of 2012.

“We are thrilled to be in business with a proven exceptional talent such as Nick Cassavetes, commented CEO Hoffman.  “We hope this will be the first of several projects with Manu and his team.”

Also earlier this month, the Company has executed a letter of intent to acquire the music assets of David Michery, a music industry veteran with an extensive track record within the industry. These music assets include recording agreements with several artists including two completed albums with multi platinum artist DMX.

Source:

http://7artspictures.com/

http://biz.yahoo.com/e/111103/sapx8-k.html?legacy=1

Financial Summary

Seven Arts Pictures plc (PLC), SAPX’s NASDAQ listing predecessor, reported revenue of $3.33 million for the fiscal year ended June 30, 2011. Net income for the period came in at $1.46 million, representing $0.77 of basic and diluted earnings per share.

These results compare to the prior year’s revenue of $6.42 million and a net loss of $476 K, which was a result of profit before interest and taxes plus other income from debt settlement, offset by net interest expense of approximately $1.71 million.

In the reported fiscal year, PLC recognized net cancellation of indebtedness revenue of $4.46 million reflecting its continued efforts to reduce indebtedness and increase net shareholder equity. As reported in prior fiscal years, such cancellation of indebtedness income reflects adjustments to debtors’ claims on future film revenues and in management’s view represents continuing revenue and profits from core operations.

Source: http://finance.yahoo.com/news/Seven-Arts-Entertainment-iw-1526461913.html?x=0

Financial Strength (21-Nov-2011)

Company

Industry

Sector

S&P 500

Quick Ratio (MRQ) 1.46 1.14 0.77
Current Ratio (MRQ) 0.92 2.08 1.38 1.13
LT Debt to Equity (MRQ) 33.98 60.76 59.60 109.16
Total Debt to Equity (MRQ) 33.98 71.18 99.75 146.99
Interest Coverage (TTM) 0.00 0.55 26.10

Source: Reuters.com, SEC Filings.

Technical Analysis

Source: http://stockcharts.com

SAPX is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

SAPX’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

Comparative Analysis

Company Name Ticker Price per Mrkt. Cap. P/E P/S
Nov-21-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
Lions Gate Entertainment Corp. LGF 8.47 1.07B 141.17 16.61 0.73 0.64
DreamWorks Animation SKG Inc. DWA 16.57 1.38B 14.04 12.84 1.90 1.84
Movie Production, Theaters Median       32.19 n/a 1.59 n/a
Seven Arts Pictures PLC SAPX 0.51 1.11M n/a n/a n/a n/a

Source: Thomson Financial

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