Ardent Leisure share price ‘materially undervalued’: expert

Scared looking people on a rollercoaster ride representing the volatile Mineral Resources share price in 2022Scared looking people on a rollercoaster ride representing the volatile Mineral Resources share price in 2022

The Ardent Leisure Group Ltd (ASX: ALG) share price is up by almost 2% in early afternoon trading to 53.5 cents.

Shares in the theme park operator have fallen by more than 60% in value this month following a capital return to shareholders.

Ardent Leisure owns and operates a bunch of entertainment and leisure businesses including the theme parks Dreamworld and WhiteWater World, as well as SkyPoint, on the Gold Coast in Queensland.

One expert believes the Ardent Leisure share price is now way below what it should be.

Improving public perception of Ardent Leisure

WAM Capital Limited (ASX: WAM) is a listed investment company run by Wilson Asset Management. Its mandate: To invest in the “most compelling undervalued growth opportunities in the Australian market”.

The company released its June 2022 investor update yesterday. In it, the fund manager explained that Ardent Leisure was a positive contributor to the fund’s performance in June.

In the update, Wilson said:

With Ardent Leisure Group’s theme parks being materially impacted throughout the coronavirus pandemic, we believe the business is in a strong position to capitalise on a recovering domestic and international tourism sector.

The company’s operating cost base has been structurally lowered, with reinvestment in the rides and attractions, and improving public perception, which we expect to underpin a strong recovery in its profitability in FY2023.

A tragic accident at Dreamworld in 2016 severely damaged the public perception of Ardent Leisure.

Four people were killed and others injured when a floating platform overturned on the Thunder River Rapids Ride. A two-year inquest was concluded in 2020. The ride is now closed.

Share price ‘materially undervalues’ Ardent Leisure

Wilson said the Ardent Leisure share price is low compared to its global peers.

Wilson said:

We believe Ardent Leisure Group’s current share price materially undervalues the company relative to global peers, while opportunity exists to unlock further value via development of excess land assets.

Ardent Leisure share price snapshot

Ardent Leisure shares plummeted after the inquest’s findings were handed down in February 2020.

They reached a trough in March 2020 and have gradually recovered since to be up 605% at the start of this month.

The Ardent Leisure share price then hit the skids again but for very different reasons. It’s down more than 60% from $1.41 at the market close on 1 July to 53.5 cents today.

The follows a shareholder vote in favour of selling the main event business in the United States to Dave & Buster’s Entertainment, Inc. This meant a return of capital for shareholders totalling $455.7 million.

This was paid on Wednesday in the form of an unfranked special dividend of 95 cents per share.

The post Ardent Leisure share price ‘materially undervalued’: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in WAM Capital Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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