Credit Suisse sees 'buying opportunity' for Merlin Entertainments
After Legoland operator Merlin Entertainments's profit warning sent its shares tumbling, Credit Suisse saw this new lower entry point as an opportunity to upgrade the shares from 'neutral' to 'outperform'.
FTSE 100
7,952.62
17:14 28/03/24
FTSE 350
4,383.21
17:14 28/03/24
FTSE All-Share
4,338.05
16:50 28/03/24
Merlin Entertainments
454.60p
16:54 01/11/19
Travel & Leisure
7,949.88
17:14 28/03/24
The Swiss bank cut its target price for the coming year from 500p to 440p but said this still offered 16% potential upside, with analysts noting the UK firm's one-year forward price earnings ratio had "never been lower".
Merlin's "clear discipline around capital and efficiencies, an unaltered opportunity for high returns on new projects and a cheap valuation" were all good reasons to warrant the positive stance.
Credit Suisse analysts noted that Merlin's newly reframed strategy meant earnings per share forecasts had been trimmed by 6-14% for the current year up to 2020.
However, Merlin's existing and proven themed accommodation businesses, along with its cost saving plans had demonstrated an "efficiency mindset" that helped to underpin margin growth.
Merlin was seen as "impressive for a UK midcap" as its "global opening plans are credible and supported by a well-established track record of success and robust returns".
By the close on Wednesday, the shares had lost another 2% to 370p.