Cineworld (CINE) 298p

Gain to date: 12.7%

Original entry point: Buy at 264.4p, 3 May 2018

Cineworld’s (CINE) ownership of US cinema chain Regal Entertainment is going better than expected, helping to put the share price back on an upward trajectory.

It has increased anticipated synergies from the deal by 50% to $150m, having achieved $70m synergies in its 2018 financial year versus a planned $40m to $45m.

US operations have been very good with admissions up 4.9% and box office revenue rising by 7.2%. Encouragingly, US retail income which relates to food and drink sales increased by 8.2%.

Chief executive Mooky Greidinger says Cineworld will sign up a food and drink partner in the US as the business tries to emulate the success it has seen in the UK from having Starbucks cafés located inside cinemas.

UK admissions slipped by 2.6% in the year with the company blaming the World Cup and the hot summer weather. Greidinger says he isn’t worried in the slightest.

Work is underway to refurbish various Regal sites with Cineworld confident that income will increase once the cinemas are spruced up, based on the way other refurbishment projects have turned out.

SHARES SAYS: Large debt is still the main negative with Cineworld’s investment case, yet trading is good and strong cash generation should help to pay down borrowings to more comfortable levels in time. Keep buying.

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