Amalgamated on a roll

Amalgamated's share price has increased 21% in the past month, which is a big move for such a pedestrian business. The company recently reported a 68% increase in operating profit to $47m compared to the same period last year for the quarter ending 30 September, following an 'outstanding' skiing season at Thredbo and good performances from its German cinema and local hotel business.

Amalgamated also has a number of investments that should help increase profits in the years ahead. Three QT hotels are scheduled to open at Bondi in Sydney, Melbourne and Queenstown, the adrenalin capital of New Zealand. New cinemas are also expected to open or have been proposed in half a dozen locations around Australia.

On a forecast price-to-earnings ratio of 19 and a 3.7% dividend yield Amalgamated isn't cheap. But it's conservatively run for the long term and with earnings and dividends likely to increase steadily over time, and interest rates in Australia potentially heading much lower, we're increasing the Sell price in the recommendation guide to $12.50.

We'll likely consider selling our stake in the model Income Portfolio if the share price approaches $12, but if Amalgamated has become a large part of your portfolio you might start taking profits now. With the share price increasing 34% since Amalgamated Holdings from 9 Jul 13 (Hold – $8.38) we're sticking with HOLD.

Note: The model Income Portfolio owns shares in Amalgamated Holdings.