City prepares for Merlin Entertainments results magic show

Kasmira Jefford
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Merlin Entertainments is set to announce its maiden set of results on 27 February since its successful return to the market in November, sparking a flurry of analyst notes this week predicting good things from the Alton Towers owner.

In a note from Deutsche Bank, analysts have restated a “buy” recommendation and target price of 395p - indicating a potential upside of 10.40 per cent from the stock’s previous close.

The bank expects Merlin to post revenues up 11.3 per cent to £1.2bn in the year to 31 December and earnings before interest, tax, depreciation and amortisation to have risen 11.6 per cent to £386m:

We expect that the strong momentum up to week 35 (end of August) will have continued into September and the fourth quarter, driven by continued recovery in UK from the weather and London Olympics’ depressed comparatives from 2012.

Deutsche Bank has shaved around three per cent off its 2014 and 2015 profit forecast due to recent foreign exchange movements, however it expects Merlin to give an upbeat outlook in terms of like-for-like growth and the company to be on track in terms of rolling out new attractions.

Analysts at Jefferies and Investec have both inititiated coverage this week with a “buy” rating.

Investec’s James Hollins told investors to “believe in magic”:

Merlin offers unrivalled exposure to the global leisure sector, with strong barriers to entry, exceptional brand value and organic growth opportunities. The group has attractive diversity across its customer demographic, attraction-type (from 2-hour to multi-day visits), geography (22 countries worldwide) and asset base (freehold/leasehold mix). Supported by the stated intention to pay a dividend to shareholders and with myriad growth drivers, we initiate on Merlin with a “buy” recommendation and 415p target price.

Shares closed down 0.6 per cent at 355.66p, above their November offer price of 315p.

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