US Edition Cineworld
218p +10p
Questor says BUY
It's been a great year for Cineworld so far – and the first instalment of the final Harry Potter film has not even hit its screens. This "guaranteed blockbuster" should keep Cineworld's seats full in the latter part of the year.
Yesterday, the country's second-largest cinema chain, said that in the 42 weeks to October 21, revenues had risen by 8.5pc. The results were boosted by the success of 3D releases Shrek Forever After and Toy Story 3, as well as traditional-format films such as The Twilight Saga: Eclipse.
The company's investment in 3D screens is paying off, with the Toy Story sequel being the biggest film release of the year to date, grossing more than £70m in the UK and Ireland. The group plans to install a further 150 digital projectors by the end of January 2011. When this is finished, more than 50pc of Cineworld's 801 screens will be digital, with the vast majority being 3D-enabled.
Another positive is the resurgence of advertising. There are "growing signs of recovery in the cinema screen advertising market," Cineworld said.
The group said it was confident of delivering full-year results at least in line with market expectations. The released schedule for the rest of the year looks strong and should support this. As well as Harry Potter & the Deathly Hallows, other releases include Chronicles of Narnia: Voyage of the Dawn Treader and Tron.
Cineworld's share of UK box office also rose in the year to date to 24.5pc from 23.8pc in 2009.
The shares are trading on a December 2010 earnings multiple of 12.4, falling to 11.2 next year. The yield is a very healthy 5pc – and investors who bought in on the original tip at 120p on March 15 last year should have locked in a super yield of more than 8pc.
The shares have shown considerable capital appreciation – rising by 82pc compared with the FTSE 100 up 51pc but remain a buy as both a yield play and a growth story.