finnCap believe Patisserie Holdings share price is still trading at a discount
Companies: Patisserie
finnCap have published a positive report on Patisserie Holdings Plc (LSE: CAKE) this morning, saying it is confident of the company’s FY16 performance, and arguing that the group’s share price is still trading at a Brexit discount.
“The share price remains 10% below pre-referendum levels and has been largely ignored in the post-Brexit recovery.”
Patisserie Holdings saw weaker performance in the 6 weeks before Brexit, but report that it is now “business as usual” across its stores. Patisserie Valerie, the luxurious bakery brand by which CAKE trades, suffered as Brexit uncertainty caused consumers to hold of on more expensive eating.
“Low average spend per head (£10) makes this a defensible purchase (indulgent treat), and big-ticket spend (normally the first to go) is still holding up…”
Analyst Roger Tejwani writes that the company’s FY17 plans for new outlets are exceeding finnCap’s forecasts, with almost half already agreed:
“Longer-term, the previously announced 250-strong outlet opportunity is also looking conservative given the success across multiple formats (department stores, service stations, railway stations, retail parks).”
finnCap highlight good performance in several of CAKE’s partnerships with high street and online retailers. There are now 8 in-store cafés in Debenhams giving the company access to great locations at a fraction of the cost:
“…low-cost access to high street footfall – Oxford Street, for example, costs £140k (compared to an estimated £1.6m if standalone), yet returns £25k per week.”
The same model is also being run at Next and Fenwicks stores. The groups’ “create-a-cake” campaign, being run through Amazon, Wowcher, and Groupon is also performing well, with 2,000 units sold per week.
CAKE's share price was up 4.6% on Friday, and is up 14% in August.