Ardent, meaning 'very enthusiastic or passionate', and leisure, meaning 'use of free time for enjoyment' together provide a very apt definition for good-times business Ardent Leisure Limited (ASX: AAD).
Consisting of a number of entertainment assets internationally, Ardent Leisure operates Dreamworld and Whitewater World on the Gold Coast, Goodlife Fitness Centres, Kingpin and AMF bowling alleys, and Main Event family entertainment centres in the US.
As a company its performance has been exemplary, up 77% in the past five years before dividends, and its 2014 performance has been respectable despite the slowing of earnings in several divisions.
Ardent's Main Event Centres and Goodlife Health clubs have driven earnings so far this year (up 26.2% and 16.7% respectively), with the Bowling and Theme Park divisions also making a modest contribution (up 9% and 5.9%, respectively).
Main Event appears to be the lead horse for Ardent, which has accelerated plans to increase the number of venues, whilst negotiating for further sites.
Goodlife Health clubs were second cab off the rank, having added the Hypoxi weight loss program to their retinue which should increase the brand's unique appeal, whilst two new centres in the latest quarter will increase its footprint.
Being somewhat of an exercise Neanderthal, I admit to considerable scepticism about the Hypoxi program. However results will very quickly speak for themselves and if Hypoxi works as well as it appears, I see it as a successful addition to the portfolio.
Ardent Leisure has some work to do to reboot earnings growth in the remainder of its businesses, but one of the things I like most about this company is its innovative approach to leisure, delivering new types of experiences that are novel and thus, more likely to be successful. Ardent also pays a pretty decent 4.8% unfranked dividend.
There are as always several risks associated with ownership of Ardent, firstly around the volatile nature of discretionary spending, which rising interest rates or unemployment could certainly dampen.
Ardent also operates in a highly competitive environment, uses gearing (currently 33.7%) to achieve earnings, and appears marginally overvalued at the moment.
If the price were say 10-15% cheaper, I would consider this company to be an outright buy. Even now I would give the tick of approval to investors, if you were dead set on making an acquisition and couldn't find a better share to purchase.
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