HSBC initiates coverage of Cineworld with a 'buy' rating

3rd Nov 2016 09:23

(ShareCast News) - Cineworld Group's shares rose on Thursday as HSBC initiated coverage of the stock with a 'buy' rating and a target price of 720p.HSBC said Cineworld is a "UK cash cow" with the one of the market leading cinema chains in the nation. It has 115 sites generating more than £100m in earnings before interest, tax, depreciation and amortisation."Management's strategy of investing in sites and lean operations is paying off, leaving it with an up-to-date estate, circa 500,000 monthly subscribers and a strong cash base to capture market share for the upcoming blockbuster year in 2017," HSBC said."The counter cyclical nature of the industry should benefit from any Brexit related uncertainty."The first half of 2016 struggled against tough comparatives in 2015 with the release of blockbuster films Spectre, Star Wars, Avengers and Jurassic Park.However, the second half has picked up with a strong July-September quarter and HSBC expects the momentum to continue."The future looks bright for the rest of H2 16 with a number of major titles including Doctor Strange, Harry Potter's: Fantastic Beasts and Where to Find Them and Star Wars: Rogue One setting in the rest of the year for success," HSBC said.Shares increased 0.84% to 542p at 0938 BST.