In the past month shares of Village Roadshow Ltd (ASX: VRL) – a leading film producer, cinema and theme park owner – have tanked, falling 16%.
Down 20.7% since the beginning of 2014, investors have clearly lost faith in the company. This is in stark contrast to the performance of listed-peers Ardent Leisure Group (ASX: AAD) and Amalgamated Holdings (ASX: AHD) which are up 37% and 32%, respectively.
Perhaps the reason Village shares have fallen in recent times can be put down to poor consumer confidence figures, the higher household savings ratio or maybe even the budget black hole?
Whatever the reason, I don't think it is worth worrying about. In fact, I'm licking my lips at the opportunity to buy Village shares on the cheap.
And if you're a long-term investor like me, rather than panic out of fear of not knowing, these short-term gyrations can provide an opportunity to buy stock cheaper than what you could have previously. Usually this'll mean a better dividend yield too.
For those looking 5 or 10 years into the future, it's important to ignore the doomsayers who've predicted five of the last two share price drops and make your investment decision based on the facts.
Indeed longer than I care to remember analysts have been sceptical of Village's ability to beat the market. Its share price is up 250% in five years.
And the latest price fall puts its stock on forward P/E ratio of 14.7 and dividend yield of 4.6%.
Who is Village?
Most Australians will be familiar with the name, but to give you an idea of who Village Roadshow is, here's a quick bio:
- It's a 47% owner of the Los Angeles-based entertainment division, Village Roadshow Entertainment Group (including Village Roadshow Pictures film production and distribution).
- Together with strategic partners, Village operates 700 cinemas in Australia, Singapore and the United States (where it has a stake in the iPic brand).
- It is a leading distributor of films to cinemas, pay-tv and free-to-air television. It also has a strong presence in the emerging digital space, distributing electronic content on platforms like iTunes, Foxtel and more. It has long-standing contracts to distribute for Warner Bros., The Weinstein Company, Lionsgate and Film Nation (today Village announced it has acquired a one-third interest in Film Nation).
- Village also owns theme parks such as Sea World, Wet'n'Wild and Movie World. This division could provide significant long-term growth opportunities in the emerging economies of Asia.
Buy, Hold, or Sell?
Despite the doomsayers, an investment in Village has provided a 21.5% compound annual return over the past 10 years. With a growing theme park network in Asia, good dividend yield and market price, I think Village Roadshow is worthy of a second look.
