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Broker First Columbus has today initiated its coverage of theatre group Reach4Entertainment (LSE:R4E) with a buy stance at 4.9p and a target price of 10p. That may be on the cautious side. It is clear that Reach has stabilised and is out of the critical ward and on the recovery path something the broker note on this AIM listed company makes clear.
For my last thoughts on this company click HERE
The First Columbus note reads:
reach4entertainment is one of the world’s leading providers of services to a very buoyant part of the entertainment industry. The new management has stabilized the group’s debt position and begun a restructuring process which should lead to the company generating far higher profits. With the share price down at these levels, even modest success in its current endeavours could see the share price rise to a multiple of its current level. Buy
– New management has stabilised r4e’s debt problem. r4e still has too much debt, but the management has managed to bring down its debt by almost 30% in the last two years and secured long-term bank funding.
– Profitability should improve from here. In the year to December 2012, we expect r4e to deliver its first profit at the pre-tax level for three years. The group has now sold most of its non-core businesses and focused on cutting costs and expanding its client base. It has also created three new operations which should help capitalise on its extensive entertainment experience and contacts.
– We are forecasting decent growth. We are forecasting that r4e’s pre-tax profits will grow at an average compound rate of 46% a year for the next three years, and EPS by 15% a year.
– Buy for the recovery potential. It is still too early to tell how well the new management’s initiatives are working, but the group has significant recovery potential and with the share price close to its all time low, the shares are now looking attractive
| Year End: December | |||||
| (£m) | 2011* | 2012E | 2013E | 2014E | 2015E |
| Revenue | 78.2 | 70.0 | 75.0 | 80.0 | 86.0 |
| EBITDA | (0.33) | 1.35 | 1.76 | 2.02 | 2.27 |
| EBIT | (0.79) | 1.05 | 1.45 | 1.66 | 1.90 |
| PBT (normalised) | (1.60) | 0.40 | 0.80 | 1.00 | 1.25 |
| Net income (normalised) | (1.45) | 0.60 | 0.76 | 0.90 | 1.00 |
| EPS (p) | (2.5p) | 0.9p | 1.0p | 1.2p | 1.4p |
Tom Winnifrith writes for 10 US and UK websites and links to all of his free to access material can be found on his own blog www.TomWinnifrith.com
He also blogs on the website of the restaurant which he runs and where he is the head chef www.therealmanpizzacompany.com
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Andy,
Perhaps because my note was from several months ago and theirs is now. Someone who can’t read a date can’t be expected to recognise 42.7% per tip over 12 years is not bad as a track record.
If you are going to try and make jokes get your facts right.
Best wishes
Tom
Andy
Not entirely woeful. saying buy heavly when others said sell at 3p was not a bad call. We shall see on forecasts. Ask Stoller yourself at UKInvestor show
Tom