Merlin magic ebbing at London attractions, warns UBS

10th Jan 2019 14:02

(Sharecast News) - UBS recommended clients sell Merlin Entertainments shares on Thursday after its research showed a decline in average reviews at the group's Midway attractions and Legoland parks in the UK.The Swiss bank, which downgraded its rating from 'neutral' and cut its target price to 295p from 380p, said the research had made it "more cautious" about the Midway recovery, worrying that "this trend could be the result of poor investment or operational decisions" as management look to cut costs and "suggests further weakness in 2019".Customer review data for the Midway divisions, included London Eye and Madam Tussauds London seeing "meaningful" year-on-year declines in average review scores, with new brand Little Big City the third worst performing brand in the group for reviews.The the core London sites accounting for more than a third of profits but just 5% of sites, the analysts said such declining reviews and hence attendance "could have a disproportionate effect on Midway profitability" and so reduced their forecasts for like-for-like growth from the division this year from 2% to 1%.Legoland is still seen as a strong Merlin brand, "with clear roll-out potential" around the world, but the weak LFL growth performance last year highlights risks to growth, with customer review data showing a "significant" decline in average reviews at Legoland Windsor, which may remain a drag in 2019, and leading to another cut in LFL growth forecast from 4% to 3% for 2019.