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, 2020-01-10 09:26:15
I expect plenty of fireworks from Ten Entertainment Group when it releases a full-year trading update on Friday, January 17. The bowling alley operator’s share price rose 26% in 2019 amid some terrific trading news, and I see no reason for that trend to end any time soon.
And neither do City analysts, it must be said. For 2020 broker consensus points to a 16% earnings rise, following on from a predicted 19% rise for last year. And it’s expected to keep things going with a 12% advance in 2021.
Yet despite these readings Ten Entertainment looks quite undervalued in my book. At current prices it carries a forward price-to-earnings (P/E) ratio of 14 times and a sub-1 price-to-earnings growth (PEG) multiple of 0.9 to boot.
Bright Growth Plans
Ten-pin bowling has come back to the UK with a bang in recent years, and as the second-biggest operator in the country Ten Entertainment has been in one of the box seats to capitalise on this trend.
Like-for-like sales burst 7.1% higher in the first six months of 2019, putting the 3.1% rise of the same 2018 period firmly in the shade. And the leisure giant expects like-for-like revenues to keep growing at a healthy rate of between 4% and 6% over the long term.
It’s no mystery as to why Ten Entertainment continues to bulk up its site estate, then. In 2018 it acquired four complexes and followed this up with another two in the first half of last year. And it has a strong balance sheet with little bank debt (this fell by more than £1 million in the six months to June, to £3.2 million) to keep the acquisitions — not to mention the refurbishments of its existing estate — coming.
Incidentally, the business has secured a new bank financing deal recently which gives it access to a larger £25 million for the next three years at a reduced cost. As the firm itself comments, this “gives the group access to increased funds when opportunities arise to accelerate the investment programme.”
You’d be mistaken for thinking that Ten Entertainment is just a great pick because of its perky growth prospects, however.
Thanks to its financial robustness the business is lifting dividends up at phenomenal rate, too. It hiked the interim payout 12.1% year on year (to 3.7p per share) to keep its run of meaty increases going, and for the whole of 2019 City boffins are predicting an 11.8p dividend versus the 11p one of 2018.
Unsurprisingly the abacus bashers expect payments to keep growing over the medium term as well. A forecasted 13.3p per share for 2020 yields an impressive 4.2%, and the 14.8p payment for next year nudges the gauge to 4.6%. Compare these figures to the 3.3% forward average which the UK mid caps currently boast.
Good dividend growth and a solid profits outlook at low cost, then. What’s not to like? I reckon Ten Entertainment is a great share to load up on today. And particularly with those full-year numbers just around the corner.
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