Interesting note out on Ted Baker by Panmure this morning
Companies: Ted Baker PLC
Panmure put out a note on Ted Baker earlier today. The shares were more or less flat in early trading and are 16% below their 52 week high of 3139p.
In summary Panmure said:
"Ted Baker provided a 3Q17 trading update on the 17th November which reinforced our investment view. Retail sales continue to benefit from favourable exchange rate movements but lag the increase in average square footage on a constant exchange rate basis. We struggle to justify the stock’s premium rating given its exposure to the UK high street and lack of upgrade momentum and therefore continue to include the stock on our conviction list through 1Q2017 as a short."
Ted Baker's shares are down 3.85% over the last 12 months and have a current market cap of £1220m.
Panmure goes on to say:
"Retail sales were in-line with expectations. Retail sales through Q317 increased by 15.4%, broadly in-line with market expectations. This rate of growth was driven by a 30.3% increase in Ecommerce sales, which now represent 15.6% of total retail sales, and a significant FX tailwind which was not factored into analyst’s estimates at the beginning of the year."
"FX tailwinds disguise underlying downgrades. Retail sales, which include Ecommerce sales, were up just 6.7% on a constant exchange rate basis through 3Q17 against a particularly weak set of comparatives. FX therefore contributed c9pp of growth during the period which represents c56% of the total increase in retail sales. Note that the average square footage increased by 8.8% to 383k sq. ft."
Looking at valuation, the shares are trading on a historic PE multiple of 28x, compared to a sector average of 19x.
It paid a dividend of 48p last year and offers a yield of 1.7% on a realised basis.
"Trading on a premium valuation. We believe that a FY17 EV/EBITDA multiple of 13.9x is difficult to justify for an apparel retailer with significant exposure to the UK highstreet. Share prices are driven by the change in earnings expectations and TED’s upgrade momentum has stopped; this will prevent the stock from trading on a relative valuation metric close to its historical average."
Ted Baker Plc engages in the design, wholesale, and retail of menswear, womenswear, and accessories under the Ted Baker name in Europe, North America, the Middle East, Asia, and Australasia.