If you're an investor struggling to find much value in the market amongst good quality businesses you're not alone, but the market always presents the odd opportunity for investors prepared to dig a little deeper.
Cinemas, hotels and leisure business Event Hospitality & Entertainment Ltd (ASX: EVT) posted a weak first half to financial year 2017 on the back of weak cinema ticket sales in Australia and Europe. However, the subsequent share price falls may offer long-term focused investors a good entry point for a stock that offers the right mix of value, yield, and growth.
Below are five reasons to buy Event Hospitality & Entertainment shares today.
Tailwinds – As the business behind the Rydges, QT, Atura, and some Thredbo hotels it should enjoy the tailwind of growing inbound tourism into Australia, especially with the Australian dollar likely to stay low over the next 36 months.
QT Hotels – The company's successful QT Hotel brand (launched in Sydney) has supported the profit growth in particular and its latest openings in Melbourne, Canberra and the Gold Coast are reported to be performing well.
Yield – The stock offers a trailing yield of 4% plus the tax effective benefits of full franking credits, with a payout ratio around 73% that means the company has some cash left over to reinvest.
Track record – Dividends are up some 46% since 2007 (before the GFC) which suggests this is a well run company that is well positioned for the long term with reasonably defensive earnings streams. Its cinemas business is moderately cyclical in nature, but over time its earnings should even themselves out.
Value – most important of all is that the shares are selling for $12.99 this afternoon as the stock changes hands for 17x analysts' estimates for earnings per share of 76.7 cents in FY 18.
Another business in the hotel and tourism space that also still offers good value to long-term investors in my opinion is Mantra Group Ltd (ASX: MTR). Shares in the operator of the Mantra, Peppers and Breakfree brands change hands for $3.10 this afternoon and could offer investors good total returns from here.
