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Ardent Leisure takes step in right direction

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By Andrew Main
 
So, is Ardent Leisure a buy now that Gary Weiss and his Ariadne mate Brad Richmond have been invited to park their behinds on the boardroom chairs?
 
It can’t have done a great deal of harm, considering all the other issues that are queued up like Texas alligators to take a bite out of the shareholders’ funds.
 
The company is slowly recovering from the horrible Dreamworld accident of last October that took four lives.
 
Although Queenslanders would not have been thrilled in August to read that a review of the state’s workplace health and safety laws found that there are far fewer licensing and training obligations on fun park ride operators than there are on forklift drivers, for instance.
 
At least the law is bound to be tightened up, post the 58 recommendations that the report made, including appointing g a public safety ombudsman to oversee the sector.
 
That disaster played a big part in the staggered exits of chairman Neil Balnaves and CEO Deborah Thomas.
 
They were replaced respectively by George Venardos and ex-Nine CFO Simon Kelly.
 
Venardos has just had another upheaval to deal with in the tilt by the Ariadne crew for board representation that’s been running for most of this year.
 
I won’t go into tasteless jokes about bumpy rides but the cancellation on Sunday of the Extraordinary General Meeting called for Monday September 4 to vote on their inclusion was the final act in a messy proxy drama that didn’t make Chairman George, a long serving director, look all that canny.
 
George is the former CFO of insurance giant IAG, a careful man in a careful business, but he was wrong-footed by the assumption that because proxy advisory specialists CGI Glass Lewis and ISS recommended against installing Weiss and Richmond on the board, the institutions and retain investors would go the same way.
 
We’ll probably never know how the votes were going to go, but you can guess from the outcome. My spies in the industry say that a lot of boards use proxy advisors to do the heavy lifting in engaging with institutional shareholders rather than doing it themselves, and that it’s absolutely not correct to assume that shareholders are like sheep.
 
George’s crew were down on Weiss because he didn’t have any experience in the entertainment industry. Leaving aside that heartless aspersion on Weiss’s celebrated enthusiasm for the bass guitar, that’s not why he got up.
 
He’s a turnaround specialist, as is Richmond, who brought the Darden restaurant group in the US round in exemplary fashion a couple of years ago.
 
And boy, does Ardent need that skill set.
 
We haven’t even got to Ardent’s Main Event business in the US. It’s mostly in Texas so what used to be rock climbing walls have in some cases become ways of helping people keep their feet dry.
 
It’s not a disaster: only two out of 38 Main Event centres have reportedly suffered damage that’s going to keep them closed for more than a week or two, but it’s just another reason why people are down on the stock.
 
Another spy notes that Main Event’s quite a lot smaller than its competitor Dave & Buster’s , which has around 100 locations in the US.
 
A bright point my spy also noted was that if it all gets too hard for Dreamworld, they could do worse than get the site rezoned for residential and turn developer of a big number of apartments. A very Queensland solution, but one to bear in mind.
 
The market’s been relatively unmoved by the recent board dramas, falling just 2 cents yesterday to close at $1.90.
 
That’s nowhere near the pre-accident level of $2.87 but it’s also correct that the share price dipped to $1.55 during the recriminations earlier in the year, which saw the company declare a $49 million half year loss after writing down Dreamworld’s value by more than $90 million.
 
Among the brokers Credit Suisse deserves some sort of medal for cheering the stock on, being currently the only one of seven brokers polled by FNArena that’s got anything resembling a Buy on the stock.
 
To be achingly fair, Credit Suisse also called it a Buy in March when it was just over $1.60, so it’s consistent as well as right, for the time being at least. And its latest assessment was dated August 14, well before Hurricane Harvey turned up on the scene.
 
I understand Ariadne assembled its 10% stake by picking up stock around the $1.60 mark, so it’s well set. Credit Suisse has a 12-month target of $2.15 on the stock.
 
The least excited broker is UBS, which has a $1.60 target on the stock and a Sell rating. It’s kind enough to note that Main Event’s got good insurance coverage that will not only cover damage but also loss of earnings.
 
Back in March I wrote of Ardent that it was a stock you wouldn’t want to hurry into at this point, given that it will take a while for the bad news to lose its impact on sentiment.
 
“It’s one for the investors who may well be tempted to pick up a few on the back foot,” I wrote, all unaware that was exactly what Gary Weiss and Ariadne were doing.
 
It’s subsequently put on around 30 cents. The Ariadne influence is probably a positive but nothing earth shattering’s going to happen in a hurry at Ardent.
 
I stick to my previous advice. It’s a cautious buy.

Published: Wednesday, September 06, 2017


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