In good times and bad, the leisure industry continues to be a critical stock market sector.
After all, irrespective of what is happening internationally, everyone has their way of spending leisure time.
Leisure stocks suffered a period of instability during the COVID-19 pandemic, and many companies had to briefly or permanently shut down. But with a revival on the cards now, discussions around investing in leisure stocks are back. And why not? The world's population is getting richer, people are gaining wealth, and an increasing percentage of us have more free time on our hands - that's good news for companies that specialise in leisure!
Whether your idea of fun is skiing, hitting the golf course, or relaxing at a resort, there are a lot of public companies generating profits by offering different ways to enjoy leisure time.
Is the leisure industry turning around?
First things first, it is important to understand the constituents of the leisure industry. Today, leisure stocks cover a wide array of companies in the stock market. These include video streaming, travel, and social media companies, to name a few. Globally, household names like Facebook, AMC Entertainment and Netflix are all part of the leisure industry.
Things finally seem to be looking up for the industry, with restrictions eased and bans on travel being lifted. The leisure and recreation industry caters primarily to outdoor activities and depends mainly on overall economic conditions. It got a much-needed boost in the past few weeks with countries easing COVID-19 restrictive norms.
Besides, with the vaccination drive in full swing, people are feeling a lot confident to go out. So much so, in a lot of places across the world (like parts of the USA), people need not go for a mandatory COVID-19 test before flying or quarantine after flying.
Given the improved scenario, more people are traveling and making plans as the end of another unprecedented year approaches. Public entertainment joints have also started drawing more footfall. Air travel too is rising, giving a huge relief to the airlines. The leisure and recreation industry are thus set to finally get a boost.
Investors are gearing up for some fun times too, read on!
Stance of ASX-listed leisure stock
There are several Australian companies that are categorised under the Leisure subsector or have business operations under this segment and whose shares are publicly listed on the Australian stock exchanges (ASX).
Let’s understand their current stance:
• Aristocrat Leisure Limited’s (ASX:ALL) stock has been up by over 7% over the past three months. Earlier this year, Aristocrat Leisure reported a significant 27% net income growth seen over the past five years. The Company also reviewed and confirmed its growth strategy. The business’ operational and financial strengths further enhanced its strength and capability to sustain market-leading organic investment in its strategic differentiators of people, product, and performance.
The Group’s growth continues to be underpinned by sustained investment in game design, development, and technology. Besides, the Company seems determined to keep sharing its profits with shareholders, evident from its long history of paying a dividend for at least ten years.
• Apollo Tourism & Leisure Ltd’s (ASX:ATL) market capitalisation is currently $134.95 million. The Company reported revenue of $293.3 million in FY21. Despite the absence of international guests, in periods where domestic borders were open, Apollo was able to generate strong domestic demand with domestic revenues significantly exceeding pre-COVID levels. Record levels of RV sales demand were experienced in all regions, ex-rental fleet vehicle sales were accelerated in Australia, New Zealand and Canada, and the European peak summer 2020 period remained largely restriction free.
With record RV sales demand, a rising forward rental book, a lesser permanent cost base, and improved technological, people and financial infrastructure, Apollo is well placed to benefit from the reviving of domestic and global borders and return to profitability.
• Ardent Leisure Group Limited (ASX:ALG) recently hit an over $700 million market cap. Interestingly, there was some insider buying at Ardent Leisure Group over the last quarter. The Company’s results have improved notwithstanding the ongoing impact of COVID-19 on the business. Net loss after tax was $86.9 million compared to $136.1 million in the prior year. The second half of the financial year has seen Main Event rebound well, with constant centre EBITDA outperforming pre-COVID levels in the latter part of the year.
Ardent Leisure Chairman, Dr Gary Weiss recently commented “we are optimistic that this positive momentum will continue into FY22.”
All in all, leisure companies in Australia seem well-positioned for future growth once market conditions begin to improve. For investors, it could be wise to invest in leisure and recreation stocks with reopening occurring on a wider scale and public's confidence getting a shot in the arm (literally too!).
However, one must be constantly vigilant about micro and macro factors impacting the share markets every day, as sinusoidal trends are likely to continue. Also, we must not forget that the pandemic is still not over.
Source: Kunal Sawhney/Kalkine Media.
Images: Ardent Leisure's Dreamworld (top) and Apollo Tourism & Leisure Ltd (below).
About the author
Kunal Sawhney
Chief Executive, Kalkine Group
An entrepreneur with revolutionary ideas, Kunal Sawhney is a financial professional with wealth of knowledge in equities who aims to transform the delivery of equity research through tech-driven digital platforms
With his knowledge, skillset, and overarching vision, Sawhney established Kalkine (a business that is based on Digitally Powered Architecture and Extensive Data Science led Premium Research) that has become one of the fastest growing equity market research firms across Australia in 2014; and subsequently, in other emerging and developed markets.
Sawhney’s entrepreneurial and commercial skills backed by the passion to establish a tech-empowered research platform, helped in building Kalkine’s global presence across diverse geographies - Australia, New Zealand, Canada, and the United Kingdom. Further, the plans for the US launch in 2021, have set the premise for attaining an all-encompassing client reach for Kalkine’s Subscription and Media Operations.
With a Master of Business Administration degree from University of Technology, Sydney; Sawhney’s business acumen has enabled his brainchild, Kalkine, help clients navigate through equity related matters in a proficient and seamless manner.
Sawhney is featured regularly on CNBC, Sky Business, Biz News, Daily Mail, Yahoo Finance, KCBS Radio (Audacy), Bloomberg, Sydney Morning Herald, Global Banking and Financial Review and many more.
Click here to visit the Kalkine website.
Read more from this author
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