JP Morgan sees attractive entry point in Entertainment One

The recent sharp drop in the price of Entertainment One’s shares offered an “attractive” entry point, analysts at JP Morgan said.

A £285m debt issue was priced on 4 December at 6.875%. Mechanistically, the terms of that debt refinancing meant the company’s adjusted earnings per share would be 3% and 8% lower in fiscal years 2016 and 2017, respectively, from 21.3p and 22.9p to 20.7p and 21.1p.

However, the broker noted that chief Darren Throop pulled out his cheque book on 9 December, picking up another 131,000 shares in a show of faith in his company.

Furthermore, in response to volatility in the share price the firm said the firm continued to trade in line with the group’s underlying expectations.

“We think both are reassuring,” analyst Marcus Diebel said.

Diebel also pointed out how free cash flow generation had improved in the first half of 2016, the valuation of the company’s library was over $1bn before the Astley Baker Davies transaction and the shares were now trading on a price to earnings multiple of 7.8 for calendar year 2016.

Diebel kept his ‘overweight’ recommendation on the shares, while trimming his target price a tad from 303p to 301p.