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Cineworld boosted by Numis upgrade to 'buy'

By Michele Maatouk

Date: Tuesday 28 Nov 2017

Cineworld boosted by Numis upgrade to 'buy'

(ShareCast News) - Cineworld got a boost on Tuesday as Numis lifted its stance on the stock to 'buy' from 'hold' and bumped up the target price by 10% to 825p following recent share price weakness.
The brokerage pointed out that the shares are down 10% since mid-August on the back of weak but cyclical UK admissions. This, combined with Numis' expectations for upgrades next year thanks to a strong film slate and mid-single digit underlying ticket prices, leads to the rating upgrade.

Numis said Cineworld's share price has been dented by a 17% drop in UK cinema admissions between August and October. However, it argued that only twice in the last 30 years have admissions fallen in consecutive years and said it is confident the quality of the film slate for the remainder of the year - which includes Star Wars VIII on 14 December - and in 2018 will support a robust outcome.

The brokerage pointed to the fact that Cineworld increased its UK ticket prices last month and restructured its 'My Cineworld Plus' scheme, effectively disincentivising the 10% online discount.

"We think customers are sufficiently engaged and the film slate sufficiently strong for this price rise to not impact admission levels (+5% average ticket price in 2018). We are therefore increasing FY18E earning per share by 3%, which is 4% ahead of consensus."

Cineworld said in a trading update last week that box office and retail takings were up this year after the chain opened and refurbished more cinemas. Total revenue in the year to 19 November rose 10.6%, or 6.5% excluding currency changes, driven by growth outside the UK and Ireland.

At 1015 GMT, the shares were up 3.4% to 676.50p.

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