Financial Trading Blog

Stock of the day 28/11/2016 – Merlin Entertainments PLC



Will sterling’s slump finally have caused some increased tourist spending for Merlin Entertainments, which reveals its latest trading statement on Wednesday?

From a market perspective Merlin hasn’t had a bad 2016 given the issues hanging over the company. After opening at £4.51 the tourism giant had slipped to £3.78 by the start of however; yet, bar an intraday nadir of £2.98 in the aftermath of the Brexit referendum, Merlin has avoided such levels since then, at one point climbing to a high of £4.95. It has settled somewhere between those two poles in the last couple of months, with Merlin Entertainments not sitting at a current trading price of £4.36 (IT-Finance.com, 28/11/2016).

Merlin Entertainments PLC Chart November 2016 Spreadex Financial Spread Betting
(Source: IT-Finance.com 28/11/2016)

Back in July Merlin reported its half year results to the end of June, with the Thorpe Park and Legoland-operator revealing a 5.3% rise in revenue to £573 million and a 0.9% increase in pre-tax profit to £50 million off of a 1.1% rise in visitor growth to 28 million.

A couple of days after being fined £5 million for the rollercoaster crash at Alton Towers the company then reported a 1.3% jump in like-for-like sales for the 38 weeks to mid-September. Yet investors weren’t impressed, as comparable sales in its Midway Attractions division (which includes the Tussauds, Eye and Dungeons brands) slipped 0.4%, with London especially affected by security fears following the various global terrorist attacks in the last 12 months.

In terms of the company’s update on Wednesday, investors’ focus will be firmly on the effects of the weakened pound. In September Merlin was yet to see any benefits; however, with the currency seeing a sustained slide across October, there may have been some positive change in the interim.

Merlin Entertainments PLC has a consensus rating of ‘Buy’ with an average target price of £4.76.

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