04 Nov 16
Breaking with convention, this Quarter we take the temperature of the expanding non-listed casual dining and bar operator sector. Looking at the top 50 operators, it appears that the £80bn market for eating and drinking out in the UK is alive and well. The AlixPartners Growth Company Index (October 2016) shows that 2-year profit CAGR has improved over the last few years, and recent surveys from Greene King, Coffer Peach and Deloitte highlight elevated spend on out-of-home occasions.
10 Aug 16
Topic of the quarter: There is a brave new retail landscape, and who would wish to be a retailer? Consumers are breaking the mould, mobile Internet is transforming shopping behaviour globally, everyone is aspiring to create the principal relationship with the consumer and there will be more retail casualties on the horizon. Those that stand the best chance of survival will be able to 1) accept the certainty of uncertainty 2) be prepared to widen the risk envelope 3) be constantly vigilant to new entrants 4) champion innovation and 5) prioritise effectively.
AIMing for income
30 Jun 16
So what is the profile of a typical AIM quoted company? The market’s detractors may argue that London’s junior market is peppered with cash consuming companies that are not sufficiently advanced in their route to profitability nor corporate governance regimes to justify their listing. Supporters of the London Stock Exchange’s growth market would say that the Alternative Investment Market is the world’s most successful market for growing companies rewarding investors prepared to brave the risks of earlier stage funding, and driving innovation and job creation. Neither view suggests that AIM would be a fertile hunting ground for income generating stocks. However a glance at the FTSE AIM All Share constituents (Source: Fidessa) suggests that over 250 of its members or circa a quarter of the market’s members pay dividends.
08 Apr 16
Topic of the quarter: While the overall number of licensed premises in Britain has declined over the past five years, there has been a significant divergence in the fortunes of wet-led and dry-led outlets as a result of changing consumer trends, the smoking ban and an uneven playing field between pubs and supermarkets. Data for 2015, however, shows that pub closures may be bottoming and dry-led outlet growth slowing amidst a deterioration in the consumer outlook, rising costs amongst operators and excess capacity in the market. With total leisure spend per consumer coming under pressure, this report considers the major eating and drinking trends amongst three core consumer groups: 18-24 year olds (who are going out less and are more concerned about food than alcohol), 25-44 year olds (who comprise 30% of out-of-home occasions and eat and drink out more than most despite having school age children) and 55+ year olds (only 4% of whom eat out more than once a week and a third of whom had not been out for a drink within the past six months).
Retain Buy rating on income opportunity
14 Jan 16
While FY 2015 results were exactly in line with our expectations, weak Q1 2016 trading leads us to trim our FY 2016 EPS forecast by 5% from 18.2p to 17.4p (+7% growth YoY). Our price target moves from 236p to 223p (+16% upside to current price) and values the equity on 12.8x FY 2016 earnings. We retain our Buy recommendation given the potential for higher capital return on a sustained basis, a key pillar of our investment case.
22 Oct 15
Keywords Studios: The stars align – initiation of coverage (BUY) | Shoe Zone: Analyst interview (BUY) | Castleton Technology*: Comfortably in line (CORP) | Servoca*: Year-end trading update (CORP) | Elecosoft*: Sale of legacy architects practice (CORP) | Europa Oil & Gas*: Wressle development (CORP)
More flip than flop
21 Oct 15
We initiate coverage with a target price of 236p (+32% upside, 12.9x our 2016E EPS) and a Buy recommendation. We think the sell-off post profit warning was overdone, although we appreciate that the valuation was frothy and trust needs to be regained. However, we think forward PE multiples (9.8x and 9.0x) undervalue the achievable 7% EPS CAGR, 6% prospective yield and potential for further capital return to shareholders. Management lock-ins expire shortly, potentially increasing liquidity in the stock.