Broker tips: Everyman Media, Yellow Cake, Kainos
By Iain Gilbert
Date: Tuesday 16 Apr 2024
(Sharecast News) - Everyman Media is "well positioned for future success", according to Canaccord Genuity, which reiterated a 'buy' rating on the company following its 2023 results on Tuesday.
The upmarket cinema chain reported full-year revenues of £90.9m, up 15.3% on 2022, on the back of an 9.7% increase in admissions and increases in both the average ticket price and average spent on food and drink. Adjusted EBITDA came in at £16.2m, up 11.7% from 2022.
"EMAN delivered a record performance in FY23, with double-digit revenue and adjusted EBITDA growth, increased market share and an expanded site portfolio, demonstrating further financial and operational progress despite a challenging consumer backdrop," said analyst Mark Photiades.
Looking ahead, the company said positive momentum continued into the first quarter of 2024, with strong trading driven by 'Dune: Part II' and high-quality awards content, and said that full-year results should "outperform 2023".
According to Photiades, Everyman's "near-term growth trajectory remains on track". He continued: "With multiple attractive attributes and strong forecast growth in revenues and profits, coupled with a robust balance sheet, we believe the brand is well positioned for future success."
The analyst, who has a 220.0p target price on the stock, noted that Everyman's shares trade at an EV-to-EBITDA multiple of 9.6x on 2024 estimates, falling to 7.8x on 2025 numbers, which he said "represents good value".
Analysts at Berenberg stood by their 'buy' recommendation for shares of Yellow Cake, the uranium oxide concentrate holding company, following a fireside chat with its boss, Andre Liebenberg.
Berenberg's main conclusion was that following the correction in uranium prices during the first quarter of 2024, the market for uranium was well placed to benefit from tight supply, supply risk and increasing demand. That was on top of the growing requirement for term material from nuclear utilities.
The German bank, which has a 776.0p target price on the stock, added that it was expecting the 12.7% discount in the shares' price versus the uranium price to narrow.
Berenberg also lowered its target price on software company Kainos from 1,315.0p to 1,260.0p on Tuesday following the group's full-year trading update on 15 April.
Kainos warned that annual revenues would be "slightly below consensus" of £400.7m, although adjusted pre-tax profits were seen in line with consensus at £76.3m for a 19.0% margin.
"Reflecting some continuation of these dynamics into FY 2025, we lower our revenue forecasts by 1.7%, 5.0% and 5.0% in FY 2024, FY 2025 and FY 2026, respectively, and reduce our price target from 1,315p to 1,260p, offering circa 24% upside," said Berenberg.
The broker noted that although Kainos was in "a cyclical slowdown", its view on the company remains "significantly positive", leading it to reiterate its ''buy' rating on the stock.
Berenberg added that a 5.3% free-cashflow yield was "an attractive entry point" for a "high-quality business" with a multi-decade growth runway.
"The company did not provide guidance on the FY 2025 outlook, although noted that its core markets offer substantial growth opportunities, while, in the near term, an increased backlog and a robust pipeline provide excellent visibility of the strength of the company's FY 2025 performance," said Berenberg.
"We retain our view of a recovery to more structural growth levels by FY 2026. In more normalised macroeconomic conditions, we expect digital services to see low double-digit growth, workday services to settle at a rate similar to that of Workday, Inc (circa 17% yoy) and Workday Products to grow by at least 20% yoy. We therefore expect revenue growth of at least 14% yoy over the medium term."
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