Village Roadshow continues to impress

We remain in no rush to sell Village Roadshow. Since upgrading the entertainment group in Village Roadshow: A profitable ride? (Long Term Buy – $3.80) its share price has rallied 97%, thanks mainly to a re-rating of decent industrial businesses, although we’ve welcomed the company’s steady refocus on shareholders and decent results from its operating divisions.

The latest spoils from this approach have just arrived in shareholders' accounts. After selling US water parks in Phoenix and Hawaii for $27m in November, Village declared a $0.25 per share special distribution (split as 13c as a special dividend and 12c as a return of capital).

Elsewhere, its recently opened water park in Sydney’s west is proving successful with seasons passes sold out and long queues over summer. These are welcome signs, yet it is too early to tell whether Wet 'n' Wild Sydney will become a regular summer fixture. Its location in Sydney’s west requires a steady stream of local visitors rather than the tourist focused Gold Coast parks.

The cinema division is also likely to report a decent 2014 result thanks to summer blockbusters such as The Hobbit: The Desolation of Smaug.

Beyond Sydney a partnership to manage new theme parks in China has the potential to boost future earnings as does its 47.6% equity stake in Village Roadshow Entertainment Group, which makes films in conjunction with Warner Bros such as the recently successful The Great Gatsby.

We’re impressed with Village’s sensible approach to its existing businesses plus its measured expansion plans. Village has exceeded our initial expectations and we are increasing the prices in the recommendation guide accordingly. Still, it’s price verse value that matters in investing and, with Village's share price up 22% since Village Roadshow: Result 2013 (Hold – $6.16), we have one eye firmly on the exit. For now though, HOLD.

For more on Village see this BossTalk podcast recorded with managing director Graham Burke.