Cineworld and Scottish Mortgage: Is it the right time to enter these FTSE stocks?

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Cineworld and Scottish Mortgage: Is it the right time to enter these FTSE stocks?

 Cineworld and Scottish Mortgage: Is it the right time to enter these FTSE stocks?
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      HIGHLIGHTS

  • Cineworld Group plc has resumed most of its operations, and the company has a positive outlook for the fourth quarter of this year.
  • Scottish Investment Trust has raised £200 million through fixed-rate unsecured private placement notes.

Covid-19 led pandemic has impacted most of the sectors during the last almost 18 months. Two sectors that got severely impacted were the asset management industry which showed a slowdown in organic growth despite the overall capital market bouncing back, and the other one was the cinema business which was completely shut down during lockdown restrictions. While the asset management business suffered due to the downward pressure on management fees, changes in investor preference and reduced profit margins, cinema business was impacted by government orders and fear of the spread of the virus.

Let us look at FTSE listed stocks from these two sectors that could be on investors radar with the rapidly improving economic scenario:

Cineworld Group Plc (LON: CINE)

The company operates the cinema business under famous brand names like Regal, Cinema City and many more. It operates over 9000 screens at 759 sites across ten countries.

The company reported its interim results for the period ended 30 June 2021. During the period, the group revenue was at USD 292.8 million. The US market alone contributed USD 211.2 million, while the rest of the revenue came from the UK and other markets. The company has been facing challenges operating at full capacity due to multiple lockdowns globally in the last six months.

After lifting of the lockdown in the US and UK in July 2021, the company has opened most of its sites and anticipate strong trading in the fourth quarter supported by pent-up demand for entertainment and upcoming new movies release.

The company presents a strong opportunity, as demand for out of home entertainment could pick up because of ease in lockdown and successful roll-out of vaccination across the world.

Cineworld Group Plc’s current market cap stands at £892.14 million as of 12 August 2021. In the last one year, the stock has given a 22.7% return to its shareholders.

Scottish Mortgage Investment Trust Plc (LON: SMT)

The company is a publically traded closed-ended equity mutual fund that is co-managed by Baillie Gifford & Co. The company invest in strong growth-oriented stocks, which could give above-average returns.

The company raised sterling-denominated £200 million through two long-term, fixed-rate unsecured private placement notes on 10 August 2021:

  • The first is a 15-year fixed-rate note of £100 million with a coupon rate of 2.03%.
  • The second note is 25-years £100 million with a fixed coupon of 2.30%.

The placement transaction has been carried successfully by Banco Santander S.A. London.

Borrowing is part of the company’s strategy to maintain an appropriate level of debt and equity balance in the portfolio to enhance the shareholders’ returns over time.

The company’s stock has given good returns to investors over the last few years. The share price of SMT stock went up by over 400% in the last five years and is up by 154% in the last three years. The company’s investment approach is to invest in growth stocks that are at the initial stages of profitability and expects to generate high future cashflow because of its superior business model. Therefore, investors who believe in such an investment approach can invest in the stock from the long term perspective.

Scottish Mortgage Investment Trust Plc’s current market cap stands at £19.09 billion as of 12 August 2021. In the last one year, the stock has given 52.43% to its shareholders.

Also Read: Scottish Mortgage Investment Trust PLC declares dividend

Conclusion

The stock prices can go through a period of volatile movement because of short term market conditions or due to the impact of any sudden development; investors should look for fundamental aspects and long-term growth prospects before selecting any stock. The above mentioned two sectors are likely to remain in the growth phase with the economy moving back to normalcy.  

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