Peel Hunt upgrades Hollywood Bowl to 'buy' after recent weakness
Peel Hunt upgraded its stance on on Wednesday to 'buy' from 'add' following recent share price weakness.
It noted that over the 15 weeks to 12 January, like-for-like sales increased by 4.5% in the UK and 14.2% in Canada.
In the UK, pricing has been rising at a compound annual growth rate of 1-2% since 2019, during which sales and post-central EBITDA (IAS 17) per outlet have both risen by 35%, Peel Hunt said.
It also estimated that the relative cost of bowling at Hollywood Bowl has fallen to half the leisure sector average.
"Labour remains the largest source of cost inflation," said the broker. "However, utility costs are hedged until the end of 2027, and exposure to food and drink costs is limited, making non-labour costs reasonably certain.
"Forecast changes should be driven by sales, where we see upside potential, supported by the strength of new openings. Additionally, 1Q trading was ahead of our full-year forecast assumption of 1.3% and the company's 3% target (2% spend; 1% volume)."
Peel Hunt said it expects net debt to decrease from £29m to £11m this year, following £40m of capex, £28mcof dividends, and £10m of share buybacks.
"We anticipate LFL sales momentum to be the primary driver of forecasts and the share price," said the broker, which maintained its 340p price target.
At 1045 BST, the shares were up 3.2% at 274.50p.
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