Whether the share market investing climate is bullish, uncertain, or bearish, Rolling 52 Week High Lists are a valuable tool for investors looking for stocks with growth potential.

On occasion, one finds a cluster of stocks from the same sector appearing in these lists.  Looking back a few weeks at stocks reaching 52 Week Highs we find four large cap entertainment and leisure stocks gracing the list; with a fifth reaching its high a few months back.

While two of these stocks benefit from substantial operations in the US – where consumer confidence and other economic indicators are improving – the remaining four do business primarily in Australia; where the outlook, we are told, is less rosy. 

Yet on 28 October the ANZ-Roy Morgan Consumer Confidence Index for Australia rose 2.7% to 114.6, representing the highest level over the past three months.  

The stock market has bounced back a bit and the warnings of those predicting another GFC type event appear to be falling on deaf ears. So maybe it is a good time to consider these top performing stocks in a sector likely to get a boost from growing consumer confidence. 

Here is a table of the five prominent entertainment and leisure stocks on the upswing, listed in alphabetical order.

 5 Entertainment Stocks Hitting 52 Week Highs

Company

(Code)

Market Cap

Share Price

52 WK % Chge

F’ward P/E

5 Yr Est P/EG

2 Yr Earn Grwth F’cast

5 Year Av. Earn Grwth

5 Yr Total  Return

Ardent Entertainment (AAD)

$1.31b

$3.28

+64%

17

1.09

12.6%

5.5%

29.3%

Aristocrat Leisure (ALL)

$3.53b

$6.41

+30%

19.4

0.92

18.6%

-8.6%

9.6%

Echo Entertainment (EGP)

$3.16b

$3.76

+43%

17.09

1.32

19.8%

Tabcorp Holdings (TAH)

$3.04b

$3.99

+13%

17.35

2.7

8.7%

-14.6%

11.6%

Tatts Group  (TTS)

$4.8b

$3.38

+6%

18.78

2.76

5.3%

-6%

14.3%

 

Ardent Leisure Group (AAD) operates in six entertainment and leisure business segments. In Australia the company has theme parks, marinas, and health clubs; with bowling centres in Australia and New Zealand, and family entertainment centres in the United States.  The share price began a steep climb towards its 52 Week High of $3.49 on 27 October following a successful capital raise and the acquisition of the Fitness First chain of health clubs in Western Australia.

On 30 October Ardent reported unaudited quarterly financial results and the stock price fell 6.1% in one day; a surprise for sure considering the results seemed strong.  Overall Group revenues were up 10.2%, buoyed by a 39.8% increase in revenues from the Main Event family entertainment centres in the US. However, revenues in both the Australian Marina and Theme Park segments were down.  

Ardent has big plans for its US Main Event centres, with three new centres to be added in the next six months and another six projected in FY 2016.  Main Event centres are akin to a one-stop family recreation center, with bowling alleys, laser tag, video and arcade games, a rock climbing centre, and family oriented restaurants and fast food service.  The GFC dealt the entertainment sector a crushing blow and Ardent is one of the few to regain most of what it lost, with its current price approaching the pre-GFC high of around $3.75.  The company has been a consistent dividend payer, with the current yield at 4.2%, unfranked.  Over ten years investors have seen an average annual rate of total shareholder return of 16.8%.

Aristocrat Leisure Limited (ALL) designs, manufactures, and distributes a variety of gaming products, including content, systems, and platforms.  Aristocrat’s products are available in about 90 countries around the world.  The company’s operating divisions are the Americas, Australia and New Zealand, and the Rest of the World.  The product line ranges from electronic gaming machines (EGMs) and interactive video terminal systems for entertainment centres to online gaming to software systems for casino management and operations.  

This is another Australian entertainment company looking to expand in the United States, where it already derives more than half of its overall revenue.  The company’s strategy calls for organic growth through games based on popular US television shows, such as Walking Dead, to acquisitions in the US.

On 30 September Aristocrat’s Walking Dead Slot Game™ was named the Casino Product of the Year at the Global Gaming Awards in Las Vegas.  Aristocrat recently added US-based slot machine manufacturer Video Gaming Technologies to its stable.  This acquisition alone is expected to add around 27,000 slot machines to its existing 8,000.  In 2012 Aristocrat bought online game producer Product Madness to expand into social media sites such as Facebook where one of the company’s games was listed in Facebook’s Top Ten Games of 2013.

In September 2014 the company announced it was selling off its European lottery businesses to focus exclusively on gaming content.  Aristocrat released Half Year 2014 results in May with a solid 7.6% revenue increase and a 9.1% rise in net profit after tax (NPAT).  Note this company has the most attractive 5 Year Estimated P/EG of 0.92 along with a healthy 2 Year Earnings Growth Forecast of more than 18%.  Although the share price is still up about 30% year over year, it has fallen a bit in recent days.  Here is a one year chart for ALL.

Echo Entertainment Group Limited (EGP) operates four casino complexes and two convention and exhibition centres in Australia.  The company was spun off from Tabcorp Holdings (TAH) back in 2011 and has taken its shareholders on a bit of a bumpy ride.  Here is a price movement chart for EGP since it began trading on the ASX as an independent entity.

On 30 October Echo management upgraded its guidance for 2015 Half Year results, announcing an anticipated increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) between 23% and 31%.  The shares shot up, reaching a new 52 week high of $3.76.  The share price had gotten a boost only two weeks ago when Echo announced the sale of is Jupiter Casino for $70 million in order to focus on operations in Sydney, Brisbane, and the Gold Coast.  Along with rival Crown Resorts Ltd (CWN), Echo Entertainment is bidding on the Queen’s Wharf project in Brisbane.  The Queensland government is expected to select a winner early in 2015.   

Tabcorp Holdings Limited (TAH) operates exclusively in Australia as a broadly diversified entertainment company.  The company’s offerings can be broken down into two broad categories – gambling and sports entertainment. Tabcorp has three gambling related business segments – wagering, gaming, and Keno – and a Media and International segment that broadcasts racing and sporting events.

Keno is a social lottery game available in literally thousands of specialized Keno outlets and video terminals throughout Victoria, New South Wales and Queensland.

Wagering on racing and sports events can be done in close to 3,000 retail outlets and in clubs and hotels all over Victoria and New South Wales.  Bettors can also get in on the action online or through mobile stgices as well as at the actual course where the event takes place.

The Media and International Division operates three Sky Racing television channels which broadcasts both racing and other sports to TAB agencies, hotels and clubs, and to individual Pay TV subscribers.

On 15 October the company issued a quarterly financial update, showing a 6.6% increase in total revenue.  Apparently this was welcome news to investors, as the Full Year 2014 results released on 7 August showed a 1.8% revenue increase.  The stock shot up, reaching its 52 Week High of $4.06 on 29 October.  Here is the chart showing the move.

Tatts Group Limited (TTS) offers gambling services both in Australia and in the United Kingdom. Along with the traditional wagering and lottery business segments, Tatts also has a division for storing, installing, maintaining, and repairing gaming machines and lottery and wagering terminals.  

However, Tatts main businesses are wagering and sports betting in Queensland, South Australia, the Northern Territory and Tasmania; and lotteries in  Victoria, Queensland, New South Wales, Tasmania, Australian Capital Territory and the Northern Territory.  

Tatts is similar to Tabcorp in that wagering revenue has historically proven to be reliable.  Both these companies have fully franked dividend yields currently over 4%.  However, both are at the mercy of government regulators overseeing much of this industry.  Both Tatts and Tabcorp filed suit against the state of Victoria when regulators did not renew the licenses to operate close to 30,000 poker machines.  The two companies used the 1994 Gaming and Betting Act as the basis of their claims, although there were differences in the two complaints.  On 26 June 2014 the Victoria courts ruled in favor of Tatts but against Tabcorp.  Tatts shareholders saw a considerable spike leading to its 52 Week High of $3.62 on 21 August, only to see it vanish later when the company reported Full Year 2014 financial results showing a 19% drop in profit and a 7.9% drop in revenue.  

Now the share price is rising yet again, this time due to a 27 October announcement that the Victorian Government is allowing Tatts to expand its public lotteries in that state.  Another provider, Intralot, is no longer offering scratch-its and daily keno and Tatts is going to get that business.  Intralot reportedly derived $51.9 million in sales from scratch-its and daily keno.  Here is a one year price movement chart for TTS showing the dizzying moves.

It is little wonder investors were enthused, given the revenue potential of the new licensing arrangement.  However, another precipitous drop may be in the offing, as the ACCC (Australian Competition and Consumer Commission) has to approve the deal.

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