The Event Hospitality and Entertainment Ltd (ASX: EVT) share price has been in a pretty strong downtrend over the past 12 months, but I think now could be a great time for investors to considering buying the shares at a pretty attractive valuation.
Here is why I think this is the case:
1. Exposure to the tourism sector:
Event has a growing portfolio of hotels and resorts which should benefit from the increasing level of inbound and domestic tourism. This business segment did show some weakness in the most recent half, but this was mainly due to short term interruptions as a result of refurbishments and redevelopments. Importantly, the company has a large pipeline of new projects that should underpin earnings growth moving forward. Furthermore, the Threbdo ski resort continues to show good levels of growth on strong increases in visitor numbers.
2. Cinema business expected to improve:
The market was left pretty disappointed with the most recent performance of the cinema division as it was unable to match the exceptional sales generated from Star Wars: The Force Awakens which was released in the prior corresponding half. However, I think investors can expect to see an improvement in sentiment as recently opened cinemas contribute to earnings and the company cycles away from the one-off spike in earnings.
3. Strong balance sheet:
Event has a rock-solid balance sheet with net debt of just $87 million and a net-debt to equity ratio of just 8.5%. Not only does this keep financing costs down, it also means the company will have no issue raising further capital to fund expansion opportunities.
4. Growing dividends:
As the slide below highlights, Event has one of the best dividend records on the ASX with consistent dividend increases over the past 16 years.
Importantly, analysts are forecasting the dividend to be maintained at 51 cents in FY17 before increasing to 53 cents in FY18. That means investors are currently being offered a pretty attractive fully franked dividend yield in excess of 4%.
Foolish takeaway
Event Hospitality and Entertainment is a market leader and offers an attractive risk-reward proposition for investors who want exposure to the tourism and leisure industry.
The company might be facing a number of short-term setbacks, but I think this makes it a great time for longer-term investors to buy shares at a discounted price.
