Technicals | Jan 20 2015
By Michael Gable
INVESTMENT VIEW – VILLAGE ROADSHOW
On balance, we consider that the recent weakness in the Village Roadshow ((VRL)) share price presents an entry opportunity at current levels.
While the investor update revealed a number of factors impacting FY15 earnings, the outlook for 2H15 is encouraging on the basis that the fundamentals in the theme parks division (visitor numbers; in-visit spending) are holding up. In particularly, the Gold Coast theme parks are well positioned to benefit any increase in tourism as a result of the lower Australian dollar. The cinema division’s expected to benefit from a strong film pipeline over the first three months of calendar 2015, which is expected to continue throughout calendar 2015.
The stronger 2H15 is expected to underpin double-digit earnings growth in group earnings for the full FY15 year.
A key risk to our view is that the Company’s Asian strategy lacks clarity and has an element of risk, including potentially extended due diligence processes, delays to completion targeted dates and whether VRL decide to take equity stakes in Asian theme parks given that VRL have not gained sufficient experience operating theme parks in Asia.
CHART VIEW – VILLAGE ROADSHOW
When VRL started the recent uptrend in 2013, it managed to rise from around $3 before topping out above $8 last year. It broke that uptrend and has continued to weaken since then. Last week saw the share price retrace about 50% of the prior uptrend. That 50% mark can often provide solid support, and as a result the share price of VRL staged a nice intra-week recovery to bounce over 10% from its lows and settle once again above $6. Volume on the day of its low was the largest we have seen since May, so we could be witnessing the last of the sellers capitulate and the buyers rapidly stepping back into VRL.
The most recent trend is still clearly on the downside, but for those happy to trade with a little risk, we could be witnessing a low in the price of VRL. Those taking on a trade at this point should consider stops at last week’s low of $5.385. If VRL continues to rally, it could head up to about $6.80 initially, before encountering the first level of resistance.
Content included in this article is not by association the view of FNArena (see our disclaimer).
Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)
Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
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Disclaimer
Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
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