Ten Entertainment (TEG) is ‘exceedingly attractive’ as the tenpin bowling operator has a limited exposure to cost inflation.
Analyst Douglas Jack retained his ‘buy’ recommendation and target price of 400p on the stock, which closed down 0.8% at 189p on Monday.
‘Ten Entertainment’s exposure to cost inflation is limited owing to having a gross margin that is in excess of 85%, a labour ratio that is below 20%, and energy costs that are fixed until September 2024,’ he said.
He also noted ‘the strength of underlying trading’ that underpins its high margins and return. Despite this, the shares have fallen with the wider sector, leaving them on a 2023 free cashflow yield of 19% and a 6% dividend yield.
‘We view the enterprise value/EBITDA rating of 3.4x [in] 2022 and 3x [in] 2023 as exceedingly attractive,’ he said.
Source: Citywire.co.uk