The Ardent Leisure Group Ltd (ASX: ALG) share price has surged more than 16% at the time of writing, following a massive buy trade.
What triggered the move?
According to an article in the Australian Financial Review (AFR), a cross-trade of 19 million shares at $1.20 each went through prior to the market opening. The massive buyer paid a 20% premium after the Ardent share price closed yesterday’s trading session at $1.005.
At the executed price the transaction was worth $22.9 million and represents nearly 4% of the company’s shares on issue. According the AFR, it is believed that the blocks desk at UBS executed the trade.
A potential takeover or positive news in the near future could explain why such a large trade was done, however the circumstances remain unclear.
How has Ardent performed recently?
Ardent is the owner and operator of leisure and entertainment centres in Australia and the US. The company owns the Main Event entertainment chain and theme park attractions such as Dreamworld and WhiteWater World.
Following a fatal accident at Dreamworld in 2016, the company’s share price has struggled to gain traction. Earlier this year Ardent reported encouraging results for FY19, with revenue and EBITDA growing 14% and 16%, respectively, for the financial year. The company’s Main Event chain continues to dominate earnings, with the theme park division still below results prior to the accident in 2016.
Improved revenues helped Ardent achieve a narrower annual loss of $60.9 million for the year, in comparison to a $90.7 million loss the year prior. Increased spending on safety, repairs and maintenance have impaired the company’s earning potential, in addition to negative publicity.
What is the outlook for Ardent?
With the Main Centre chain central to providing revenue growth, Ardent looks to open 4 more centres in FY20. In addition, the company forecasts Australian theme park attendance to grow from FY20 and looks to invest $50 million in new rides and attractions over the next 3–5 years. Ardent is also close to completing a master plan for its Gold Coast site for future theme park and commercial development.
Interestingly, UBS downgraded its price target for Ardent to $1.20 earlier this year, citing that the coronial inquiry into the 2016 fatalities could result in hefty remediation costs. The coronial report is still pending and expected in the next few months.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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