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Dreamworld takes massive hit in revenue for December

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An encouraging trading update from Ardent Leisure now has the stock showing value “too hard to ignore”, according to Credit ­Suisse analysts, who have boosted their recommendation to outperform, from neutral.

The analysts see a potential 40 per cent earnings-per-share increase over two years as confidence trickles back into the company following a deadly incident at its Dreamworld theme park in late October.

Shares in Ardent Leisure plunged as much as 32 per cent over October 25 and 26 after four people died on a family ride at the Gold Coast tourist destination, with investors bracing for significant legal and regulatory fallout. The stock hit a nine-month low at $1.82 but has since recovered.

The trading update, released by Ardent on Friday, referenced “very positive guest sentiment” at its theme parks and “strong revenue growth” at Main Event, which Credit Suisse analyst Matthew Nicholas sees as an “inflection point”.

“We believe the update represents a cyclic bottom from a newsflow perspective — the market has a sense on base attendances at Dreamworld and a weak first-half like-for-like result at Main Event has been confirmed,” Mr Nicholas said.

Along with the recommendation upgrade, Credit Suisse puts forward a sum-of-the-parts 12-month price target of $2.80, which compares to yesterday’s closing price of $2.31, up 3.4 per cent for the session.

“We’ve cut fiscal 2017 earnings (forecast) per share by about 23 per cent. However, downgrades to outer years (2-7 per cent) are less severe,” Mr Nicholas said.

“On updated numbers, Ardent Leisure trades at 17.5 times forward price to earnings ratio for fiscal 2018 (with our Dreamworld earnings about 70 per cent below peak fiscal 2016 levels), ­offering around 40 per cent earnings-per-share growth into fiscal 2019 through virtue of the Main Event rollout (US comprises almost 80 per cent of group earnings by this stage).”

Credit Suisse estimates Ardent Leisure revenues fell about 63 per cent in December following the tragedy, but says drawing conclusions on this basis is problematic because many of the park’s rides were closed.

Other brokers remain cautious on Ardent, with analysts at UBS, JPMorgan, Bell Potter and Macquarie all branding the stock a hold.


Can't all be all doom and gloom with CAB buying a 5.05% stake into ARDENT yesterday.

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