The Event Hospitality and Entertainment (ASX: EVT) share price has been trading sideways since 2015, generally between the regions of $12 to $15. The all-time high of $16.46 was reached in late 2015 and has not been broken since.
Event Hospitality and Entertainment is one of Australia's largest entertainment, tourism and hotel companies. Assets part of its entertainment division include Event Cinemas, GU Film House, and Birch, Carroll & Coyle Cinemas. The tourism and hotel companies consist of brands such as Rydges, QT Hotels and Resorts, Atura Hotels and Thredbo Alpine Resort.
Is Event currently positioned at a key turning point?
Based on the 2018 annual report, Event Hospitality and Entertainment showed a minor decrease in revenue compared to the previous year, alongside a flat net profit figure. Its entertainment division with revenue streams in Australia, New Zealand and Germany also showed weakness. The significant underperformance in Germany was primarily due to competition from the FIFA world cup.
As Event generates the majority of its revenue through cinema operations, standout titles with strong advertising are required to generate meaningful revenues. This becomes challenging as individuals realise that movie ticket prices offer poor value in comparison to streaming services which continue to grow. In 2017 and 2018, cinema attendance hit 20-year lows in countries such as the United States and Canada.
Conversely, Event's tourism and hotel companies showed strong growth. Occupancy rates increasing by 3% combined with an increase in the average room rate to $185 led to an increase in profits for the year.
Event Hospitality and Entertainment is looking to leverage technology in its tourism and hotel division to increase efficiency through automation. If successful, this can reduce the expenses in the balance sheet and further bolster earnings. Furthermore, the priority guest rewards loyalty program is another product that the company is improving. Over time, this will lead to higher membership and occupancy rates, resulting in stronger profits.
The current valuation of Event Hospitality and Entertainment shows a PE trading just below 20. There is difficulty in finding great value at this current share price as the company faces significant headwinds. However, the share price could be at its inflection point if cost reduction processes are implemented fast enough.
Foolish takeaway
With the majority of its revenue being derived from cinema operations, Event Hospitality and Entertainment looks to be in a tricky situation. However, if it manages to sell the weak performers in its cinema portfolio and increase the efficiency of its other businesses, the share price could respond very quickly.
The Event share price is currently trading at $13.56.
