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Hollywood Bowl (LSE:BOWL) is a dividend inventory with first rate momentum. After rising 5% to 278p immediately (15 April), it has now gained about 12.4% previously month, simply outperforming the FTSE 250 over this era.
Even so, this nonetheless leaves Hollywood Bowl a way decrease than a excessive of 350p reached again in Could 2024. Is the inventory price contemplating proper now?
First rate H1
The rationale for the share’s soar immediately was a stable buying and selling replace from the UK’s and Canada’s largest ten-pin bowling centre operator.
Within the six months to 31 March, income grew 9.5% to £141.5m, with 1.9% like-for-like (LFL) development. Encouragingly, the UK noticed 2.6% LFL development, displaying how Hollywood Bowl is doing effectively regardless of the robust shopper backdrop.
Throughout the interval, it opened a brand new prime location in Edmonton, Canada, the place it says buying and selling has began effectively. This introduced the property to 93, with 77 areas within the UK and 16 in Canada. And an extra three, together with two within the UK, are as a consequence of open within the second half.
CEO Stephen Burns mentioned: “Demand for high-quality, household leisure actions that provide nice worth for cash additionally stays resilient in each territories, and our money generative enterprise mannequin permits us to take a position the place we see alternatives and ship worthwhile development.”
Resilience
After all, the largest threat right here is the potential for much more strain on shopper spending because of the Center East battle. Excessive authorities debt and a reliance on vitality imports has left the UK economic system extra susceptible than most, in accordance with the IMF.
Nevertheless, one factor I like about Hollywood Bowl is the steadiness sheet. It ended March with a web money place of £26m, and no financial institution debt. This places it in a robust place, even when the UK economic system enters a downturn as vitality prices soar.
Moreover, 76% of the corporate’s whole electrical energy wants are hedged till September 2029, together with 12% supplied from on-site photo voltaic vitality. And the agency says its excessive gross margin makes it “well-insulated in opposition to inflationary pressures“.
Bowling ought to stay fashionable
We’ll study income and the dividend when the interim outcomes are printed on 27 Could. However forecasts put the ahead dividend yield at round 5%, a good method above the FTSE 250 common.
The inventory is fairly low cost as effectively, buying and selling at 11.5 occasions ahead earnings. I don’t think about that costly for a market-leading firm with a robust steadiness sheet that’s nonetheless rising in a tough shopper atmosphere.
On prime of its core bowling and amusement arcade choices, the corporate has been testing mini-golf, e-darts and go-karting in some areas. And common spend per go to has been trending up, with folks shopping for extra foods and drinks as they get pleasure from a bowl.
Lastly, after seeing success in Canada, the agency is actively evaluating different worldwide alternatives. I see no motive why the format couldn’t work in a number of nations, provided that enjoyable household actions like this are fairly common. Hollywood Bowl is already concentrating on 130 centres by 2035.
Weighing issues up, I reckon there’s loads to love about this well-run firm. The wise valuation, 5% dividend yield, and long-term abroad development potential make it a UK inventory price contemplating.
