How Merlin Entertainments PLC (LON:MERL) could have done with some magic yesterday.
The Thorpe Park owner saw 20% wiped from its market value after it said underlying earnings would come in below expectations, as terrorism and bad weather continue to weigh on revenues.
READ: Terror attacks deterring visitors to London warns Merlin
It compounded that bad news further down the statement when boss Nick Varney said it expected those “difficult” conditions in London – where it owns and operates the London Eye and Madame Tussauds among other things – to “persist for the foreseeable future”.
The subsequent sell-off now makes Merlin an “attractive” proposition, according to Credit Suisse.
Analyst at the Swiss bank said, despite the tough trading, they were still fans of the business and its efficient and disciplined management.
“We like the discipline being demonstrated by shifting capex away from low return existing businesses into proven businesses – themed accommodation, a large LEGOLAND in New York and new Midway sites (target +40 between 2015- 20E helped by newly announced formats e.g., Peppa Pig),” wrote analyst Tim Ramskill in a note.
READ: Merlin Entertainments short of magic says City
“Further, new cost saving plans demonstrate an efficiency mindset and underpin flat margins.”
Ramskill has upgraded the stock to ‘outperform’ – a ‘buy’ in old money – from neutral, although he has lowered his target price to 440p (from 500p).
“Having covered Merlin since the IPO in 2013, we have often struggled with valuation but see the significant share price fall of 30% since June (vs sector down 6%) and cheapest ever valuation as an attractive entry point.”
Merlin shares were down 2.3% to 369.2p in mid-morning trade on Wednesday.