Investment Column: Top billing for Cineworld's strong shares

Persimmon; ProStrakan Group


Our view: Buy

Share price: 164p (+0.5p)

The idea that cinemas boom during a downturn was proved right in 2009, with the annual box office gross takings in the UK breaking through £1bn for the first time. This has had Britain's largest cinema chains rubbing their hands together in glee, with the only listed group, Cineworld Group, publishing a bullish update yesterday.

Revenues last year were up almost a tenth, with the box office take soaring 14.6 per cent, and the profits expected to be in line with market expectations. This was driven by what the group called a "strong release schedule" and it picked out Slumdog Millionaire, The Twilight Saga: New Moon and Transformers: Revenge of the Fallen among the highlights. It added that the rise in interest from film fans for 3D, with Ice Age III the second highest grossing movie of the year, and also Avatar, had an additional favourable effect on admissions.

Cineworld's retail operation, which includes selling movie fans an array of crisps, fizzy drinks and ice cream, rose 7.6 per cent. The group said it more than made up for the decline in advertising revenue which made up the lion's share of the 28.7 per cent decline in "other income".

The stock is cash generative and the group believes the line-up for Hollywood in 2010 – crucial for the cinemas' cash registers to keep ringing – is strong. It includes the latest Harry Potter, Shrek 4 and Toy Story 3.

Analysts pointed out that the significant Blackstone stake was an overhang and other issues for the stock include the strong comparatives this year and people staying in on Saturday nights to watch shows like X Factor and Strictly Come Dancing. Cineworld said it hadn't seen these shows affect performance so far.

At a full year price to earnings ratio of 10.5 times the stock looks cheap and a yield of 6 per cent is an extra bonus. Cineworld looks worth a punt. Buy.

Persimmon

Our view: Hold

Share price: 500p (+31p)

Persimmon boosted sentiment across the house building sector yesterday. In a trading update ahead of its preliminary results in March, the group said forward sales into 2010 were up 40 per cent. The news on borrowings was also positive, with Persimmon saying that it had reduced debts from £1.2bn in April 2008, to around £270m at the end of December 2009.

That's the good news. The not so happy tidings are that while Persimmon is performing, mortgage availability remains constrained and the wider economy, though seemingly on the path to recovery, is fragile. Persimmon acknowledged the headwinds, but said it remains confident about the long term future of the housing market.

We agree – this country needs more houses, and Persimmon will play a part in building them. For now though, it is faced with an uncertain market, which, if it dips again, could wreak havoc on housing sector share prices.

The bulls will no doubt point to the momentum in house prices. The latest figures from the Halifax, for instance, showed an annual rise of 1.1 per cent in December, the first annual rise since early 2008.

As for the wider economy, GDP is widely expected to turn positive when the next set of quarterly figures is released later this month. Once again, we agree – there are clear signs of a recovery and we'd buy into any weakness in the stock. But given risks to the recent momentum in house prices – beyond the paucity of mortgages, we'd point out that they remain at historically record levels – and that economists continue to worry about the possibility of a double dip later in the year, we would say, hold for now. Hold.

ProStrakan Group

Our view: Buy

Share price: 101p (+16p)

ProStrakan is a company on the up. The speciality pharmaceuticals group, which published its full year trading statement yesterday, says that after reporting annual revenue growth of 40 per cent, 2010 will be the company's first year of profitability.

One thing that hasn't been on the up of late (until yesterday) is ProStrakan's share price, which has fallen by close to a third in the past three months. Chief executive Wilson Totten blamed the falls on analysts giving too much weight to the disappointing performance of Sancuso, a treatment used to guard against the nasty affects of chemotherapy, in the US.

Mr Totten pointed to yesterday's rise of 18.8 per cent as evidence that there is a bigger picture. With the group expecting to have three new drugs approved in the US this year, and the overt confidence on profitability this year, we would have to agree.

Furthermore, the recent falls mean the share now trade on an undemanding 2.4 times forecast sales, a discount to the wider market. We reckon the current level represents a good opportunity to get into ProStrakan. Buy.

PROMOTED VIDEO
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
News
i100
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Graduate / Trainee Recruitment Consultant - IT

£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz