We recently researched EVT Ltd (ASX:EVT) in The Dynamic Investor. There are several share price catalysts: i) An improving film slate, ii) Evidence of strong operating performance in Hotels and iii) An impending property sale. Do these factors support investment at current levels, or is the risk-reward unfavourable?

About EVT Ltd

EVT Ltd (formerly Event Hospitality & Entertainment) is a provider of entertainment, hospitality, and leisure services. EVT has operations in Australia, New Zealand and Germany. The Company reports three divisions:

1. Entertainment: This division comprises cinema operations in Australia, NZ and Germany primarily under the EVENT brand.
2. Travel: This division comprises Hotels and Resorts as well as the Thredbo Alpine Resort. The Hotels & Resorts business operates QT Hotels & Resorts, Rydges, Atura and Lylo brands (which are EVT brands), in addition to a suite of other brands that are managed by EVT.
3. Properties: EVT’s property portfolio, which includes a large number of hotels, was valued at $2.31b as at 30 June 2025. The earnings generated from the Company’s property assets are effectively low-risk rental income.

Key Fundamental Drivers

Improved Film Slate Supports Cinemas Operations

EVT’s “Fewer, Better” strategy has seen EVT lift yields (revenue per admission), and is based on two parts: 1) Divestment/exit underperformers – closing or exiting leases at weaker sites to recycle capital; 2) Premiumise existing sites – with IMAX, V-Max, 4DX, ScreenX, Gold Class and reclining/daybed seating.

The better the film slate, the more effective is this strategy. To this end, the film slate has recovered recently and should support a rebound in admissions volumes for EVT through 2H26/1H27. To the end of June, 2026 box office is up ~21% (on a year-on-year basis), driven by a few strong titles contributing ~A$40m (Michael, The Devil Wears Prada 2, The Super Mario Galaxy Movie, Project Hail Mary). Additionally, smaller budget movies performing well (Obsession and Backrooms) shows that well-received movies will bring audiences into cinemas.

The film slate for 1H27 also looks strong. The 1H27 period includes several potentially large films, each with strong predecessors. These include Toy Story 5 (18 June), The Odyssey (16 July), Spider-Man: Brand New Day (30 July), The Hunger Games: Sunrise on the Reaping (19 November), Avengers: Doomsday (17 December) and Dune: Part Three (17 December).

Hotels Business is the Main Growth Driver

The key growth driver for EVT’s hotels business is continuing to win high margin, capital-light managed hotel agreements. Under these agreements, EVT runs the day-to-day operations, for a management fee (base fee + incentive fee), on behalf of a property owner (i.e. EVT’s client). EVT’s competitive advantage in winning managed agreements is its strong domestic presence and a centralised operating structure across a high volume of hotels.

We highlight several factors supporting earnings growth over FY26-28: i) Integration of the Pro-Invest acquisition, which is expected to expand market opportunities, ii) A number of new/refurbished properties are due to come online through 2027-2028 and iii) Upside risk to hotel room rates and the value of existing hotels over the medium term. This is because new hotel construction across Australia and NZ is likely to come in well under current industry forecasts. This reflects the estimated 30-50% increase in construction costs post COVID.

EBITDA margin expansion is driven by the managed rooms, which should carry high incremental margins as costs are fractionalised across a centralised operating system.

The macro picture for Australian hotels is also positive, as highlighted by demand growth tracking well ahead of supply growth. Demand growth is +3% per annum, outpacing supply growth of only +2% per annum, with the risk of major new supply minimal given the increased construction and land costs to build new hotels (vs pre-COVID). Another factor supporting the positive macro picture is that Revenue Per Available Room growth of +4.1% per annum is forecast across the 10 major cities over FY25-33, underpinned by the favourable supply/demand balance.

Several Options to Further Strengthen Balance Sheet Position

EVT maintains significant balance sheet position, with $261.4m in undrawn available debt facilities alongside an independently valued corporate property portfolio estimated at $2.31b. The Company has historically maintained a strong balance sheet as it typically prefers to pursue opportunistic acquisitions of complimentary leisure assets. The Company also aims to maintain a high dividend payout ratio of 60-80% of fully-franked dividends, as opposed to capital returns or share buybacks.

The sale process for 525 George St Sydney, which commenced in June 2025, continues. A binding sale agreement could be imminent. The sale proceeds are likely to be used to support higher dividend payments and/or reduce the currently elevated gearing level.

Fundamental View

We highlight several factors warranting a cautious view:

i. EVT shares are currently trading on a 1-year forward P/E multiple of ~31x, which is towards the upper end of the trading range over the last two years. The current multiple is also unappealing in the context of an EPS growth profile of +16% over FY26-28 on a CAGR basis.

ii. While the near-term film slate looks highly supportive for growth in 1H27, the average spend per head (SPH) was flat in 1H26 and likely to be under pressure. This is due to challenging consumer conditions through 2H26/1H27. Importantly, we highlight that SPH growth is a key driver of short-term margin expansion for the Entertainment division, given that the margin benefit from the premiumisation strategy is longer-dated.

iii. EVT’s Thredbo operations are likely to be a drag on group earnings. This is due to low levels of snowfall, which present risk for further earnings downgrades for Thredbo

However, one potential catalyst for a re-rating is further progress in unlocking further value in the property portfolio. Given that no timeframe has been provided to date, we cannot incorporate any upside from them into our investment view, but it is a potential catalyst, which if eventuates could help the share price head higher.

Charting View

EVT fell sharply after peaking 12 months ago. The pace of decline has slowed since then and we can now see the stock making its first “higher high” in the past few day. It is too early to assume a turnaround from here but from a charting perspective, the initial signs are encouraging.

 

Michael Gable is managing director of Fairmont Equities.

 

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