I just learned this new interesting idea from you! Didn’t know there is a listed cinema operator in the west. Thank you :)
As for your question, we mentioned that ‘Starhub’ run mainly on debt during the workshop and I am seeing similar thing with Regal. You’re right to say that this company has stable cash flow and that’s primary the reason why the management decided to fuel this company mainly on debt, thus returned the positive paid up capital, or also known as equity to existing shareholders previously (that’s classified as additional paid in capital). In other words, if we were to liquidate this company immediately, shareholders would gained nothing since it’s funded by debt!
Since we do not have a benchmark (i.e. positive equity) to precisely assess the company’s debt level, I’d suggest you to perform debt servicing ratio instead. That’s by taking net interest expense over the operating cash flow. Do you want to try it yourself? And do you still remember the rule of thumb? :)