EVT shares tumble despite Morningstar flagging 'positive signs'
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The news: EVT shares lowered on the ASX even as Morningstar said that it sees positive signs emerging for the Event Cinemas and Rydges Hotel owner.
The numbers: EVT shares were down 4.07% to $11.08 by 11am AEDT, as the ASX 200 index fell 0.9%. Morningstar kept its fair value estimate for EVT at $12.50 per share.
Morningstar said the company's balance sheet was sound and its net debt/EBITDA was below two and its independently valued $2.3 billion property portfolio was a "source of hard asset comfort for lenders and investors".
The context: Morningstar director Brian Han noted that EVT has developed a culture of cost control involving an ongoing operational review of all job functions and processes to extract cost savings without diminishing service levels.
Han said that to date the firm has demonstrated it can deliver strong returns from its cinemas and hotels. Despite long-term risks to the cinema industry — including the growth in streaming services and the shortening of the release window from film to home format — EVT has focused on enhancing the appeal of the moviegoing experience, he noted.
The company has also developed its Rydges and QT hotel brands, reinvesting capital in its facilities to keep them current and appealing for customers, Han said. Meanwhile, EVT is active in property redevelopment, leveraging the company's large portfolio of freehold holdings.
However, Morningstar assigned the company a "high" uncertainty rating as consumers were likely to spend less on discretionary expenditure during times of economic weakness.
The source: Morningstar research
