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Merlin Entertainments 'buy' rating reiterated at Citi and Deutsche Bank
Analysts at Citi and Deutsche Bank both took a look at theme park operator Merlin Entertainments, with both firms reiterating their 'buy' rating and target price of around 500p.
With Merlin's financials ending in line with expectations, £1,594m in revenue compared to £1,589 estimates, Deutsche Bank made no changes to the firm's estimates for its current trading year, but noted it foresaw the first hald of the year to "remain subdued" against tough competition as a result of weakened tourism and a weakened sterling post-Brexit.
Citi said, "The shares have rallied off lows following the announcement of activist investor ValueAct as a 5% shareholder. We don't expect any public commentary from either ValueAct or Management but it has helped to highlight the clear value in the shares which we think have been unfairly punished following last year's weak trading on the back of terrorist attacks. As management highlights this should not alter the longer term structural growth opportunity even if there is some short term displacement of travel flows."
Whereas Deutsche's outlook recognised that it may take some time to restore confidence in the firm's growth trajectory following its Q3 losses, with its analysts saying, "We like Merlin's longer term selffunded growth trajectory, diversification by product/geography and the range of global investment opportunities. The reallocation of capex should restore growth, likely visible in FY19E. Therefore we believe the equity story remains intact and the arrival of an activist shareholder should further flag the that the valuation is too low."
Deutsche issued Merlin with a target price of 515p, while Citi gave it a 500p target price.
As of 1700 GMT, shares had picked up 9.41% to 372p.