Check out what's been happening in the world of Equity Research this week...
Companies: COS, GYM, LOGP, PINE, RR/, TRI, VCP
In the news
More entertainment from The Donald, as he educated the world about Uranium last night. And across the pond, Tony Blair decided to save the nation...
In the markets
It was a busy week in the markets, and here are some of the highlights:
- The government named and shamed firms who were paying below the minimum wage, Debenhams and Argos came off particularly badly.
- The ONS revealed that retail sales unexpectedly fell 0.3% in January
- Unilever snubbed Kraft's $143bn mega-merger proposal on Friday
- Cobham released a stinker of a profit warning (their 5th) raising the prospect of a rights issue
- Rolls-Royce announced one of the UK's largest corporate "losses" in history (More of an accounting charge, according to Forbes)
- Which? published its annual report on the UK's most popular supermarket chain, with Waitrose, Iceland, Aldi, and Lidl all performing particularly well.
Not quite a lean, fit & healthy outlook
Gym Group Plc (GYM) | N+1 Singer, 15 February
"Gym Group has done an excellent job in successfully rolling out a disruptive business model in the health & fitness market. However, we think growth expectations are too high and the shares look expensive on a FY17 P/E of 27x. We expect initial signs of increased competition / cannibalisation and LFL pressure to increase over the next 2-3 years and the shares to de-rate. We pitch our forecasts 5%-14% below consensus and initiate with a Sell recommendation and a 145p target price..."
FY17 forecast earnings growth +22%
Trifast (TRI) | Arden Partners, 16 February
"The Q317 trading update highlights Trifast performing well into emerging macroeconomic trends as the group benefits from a broad spread of geographies with 73% of FY17 Arden Partners forecast EBIT generated outside the UK, including exposure to the manufacturing sector in the eurozone. The pound depreciation is also beneficial to exports from the UK including the automotive OEMs, the largest sector exposure domestically. Given this mix of organic growth and ongoing FX tailwinds, we have revised our FY17 earnings up another 5% providing for an FY17 earnings growth forecast of 22%. Following on from upgrades at the time interims in November 16, this update highlights Trifast in sustained growth mode and fully justifying a growth rating...."
Final results 4% ahead at PBT level
Pendragon Plc (PDG) | Zeus Capital, 14 February
"Pendragon has delivered a good set of results, which are 4% ahead of our forecasts at the adjusted PBT level. The outlook for 2017 is confident as it expects to deliver double-digit revenue growth in used cars this year. We maintain our cautious forecast assumptions for now, and even on this basis, believe the shares are looking good value particularly from a dividend yield and EV/EBITDA perspective..."
Victoria (VCP) | Whitman Howard, 16 February
"Victoria Carpets has announced that it is entering the European Flooring market with 2 acquisitions in artificial grass space for initial consideration of €11.2m with deferred payment of additional €5.1m over the next 4 years..."
Lansdowne Oil & Gas (LOGP) | Beaufort Securities, 16 February
"Lansdowne Oil & Gas has announced that licence SEL 4/07 has been relinquished. This is not material or unexpected news since it follows the 2015 Middleton Prospect well which found gas but in uncommercial quantities. Our view: The relinquishment is no surprise given the 49/11-3 well result in 2015. This news does, however, simplify Lansdowne's portfolio so it and its shareholders can concentrate on the Barryroe Field, now free of litigation. We have a Speculative Buy recommendation on Lansdowne..."
Capital increase to support accelerated growth
Collagen Solutions Plc (COS) | Hardman & Co, 14 February
"Collagen Solutions is a biomaterials company developing and manufacturing medical grade collagen components for use in medical devices, research, and regenerative medicine. A number of investment initiatives have been introduced over the last year to accelerate the rate of growth, including global commercial infrastructure and the development of a pipeline of finished medical devices. The company has announced a capital increase, as well as some strategic investor venture debt, to raise gross funds of up to £12.0m to fund these initiatives, with a target of generating a five-fold sales increase over 5 years and profitability in 2019..."
Trifast (TRI) | Edison, 16 February
"In its Q317 trading update management confirmed that Trifast remains on track to achieve another record full year performance. The shares have continued to perform strongly, rising by 43% since the interim results in October. The progress appears warranted by the FX enhanced trading performance, which has enabled us to modestly increase our FY17 and FY18 forecasts. The shares are now trading on an FY18e P/E of 17.6x..."
Rolls-Royce Holdings Plc (RR/) | Edison, 16 February
"Rolls-Royce’s underlying performance in FY16 was ahead of both its own and market expectations. Media focus on the non-cash £4.4bn headline FX loss is missing what looks to be the basis for optimism. As the civil model starts to move from investment in engines for the A350 and A330neo into the aftermarket delivery phase over the remainder of the decade, we think cash flow is likely to improve, particularly if supported by an eventual recovery in Marine..."
