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Cineworld (CINE) 681p
Gain to date: 7.8%
Original entry price: Buy at 632p, 16 March 2017
‘In a dull leisure sector Cineworld continues to be a lone shining star,’ says N+1 Singer analyst Sahill Shan. We agree, yet find it perplexing that the shares have drifted downwards since a very impressive set of half-year results on 10 August.
In those numbers, Cineworld reported 57.5% rise in pre-tax profit to £48.2m and a 15.4% increase in the dividend to 6p per share. Net cash generated from operating activities increased to £65.9m from £44.4m a year earlier.
Of great interest to us is the fact that Cineworld’s non-UK business had higher earnings before interest, tax, depreciation and amortisation (EBITDA) than the UK for the first time, showing a £44.3m performance versus £40m from the domestic territory.
Many people forget Cineworld operates in multiple countries and is not entirely dependent on UK consumer spending. It has overseas operations in Poland, Israel, Hungary, Czech Republic, Bulgaria, Romania and Slovakia.
‘Management has a stated ambition to continue consolidating the European cinema market with select accretive acquisitions. At 1.6x, net debt/EBITDA is well below the 2.5x that management is comfortable with, suggesting that M&A could be on the cards,’ says investment bank Berenberg.
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