Loungers (LGRS)

Sector:

Tourism and Leisure Services

Index:

FTSE AIM 100

279.00p
   
  • Change Today:
    -1.00p
  • 52 Week High: 286.00
  • 52 Week Low: 182.50
  • Currency: UK Pounds
  • Shares Issued: 103.83m
  • Volume: 8,860
  • Market Cap: £289.68m
  • RiskGrade: 184

Broker tips: Smiths Group, AB Foods, Loungers

By Michele Maatouk

Date: Tuesday 16 May 2023

LONDON (ShareCast) - (Sharecast News) - Bank of America Merrill Lynch upgraded Smiths Group on Tuesday to 'buy' from 'underperform' and lifted the price target to 2,000p from 1,150p, as it pointed to "hidden value waiting to be realised".
ML noted that Smiths has more than 60% defensive and high aftermarket content assets.

"Smiths' portfolio exposure is biased towards defensive, regulated and late cycle markets (e.g. safety & security, energy) that should appeal to investors given macro concerns," it said. "Aftermarket (AM) is circa 38% of mix and concentrated in Detection & John Crane where demand is elevated on post-pandemic aviation security upgrades & energy security/transition."

BofA ML also argued that balance sheet strength provides substantial portfolio change optionality, both organic and inorganic.

"Management have optionality to invest organically e.g. in R&D to drive product vitality and growth, or to add scale or technology through M&A, which we think Interconnect in particular would benefit from given its sub-scale positioning vs peers," the bank said.

"We see optionality to unlock significant value from broader portfolio transformation, such as we have seen elsewhere in the UK industrial space (e.g. Spectris & IMI)."

It also pointed out that the stock trades at a discount of around 25% to sector one-year forward EV/EBITA versus a slight premium historically. This discounts headwinds from construction in Flex-Tek, it said.

The bank said it was lifting its operating profit estimates by 5% to 22% on a stronger outlook for Detection & John Crane, particularly in the aftermarket segments.



Elsewhere, Shore Capital initiated coverage of Loungers at 'buy' with a fair value of 300p, referring to the company as a "high-quality" business.

ShoreCap said the group exhibits "exceptional and consistent" cash returns on invested capital per site of over 30% and in its view, "has the runway to replicate these returns on an estate more than double today's size".

"We argue that: (1) the structural shift towards hybrid working, (2) evidence sites can achieve more than 30% CROIC (cash return on capital invested) in multi-site cities and towns with less than 30k population (3) significant capacity withdrawal in the hospitality sector and, the group's hyper-localisation and refurb strategy are all supportive of high-quality site replication," it said.

"At 195p and on a 5.5 EV/EBITDA (pre-IFRS) we do not believe these qualities are reflected and in fact we believe the market has effectively priced a whole peak of trade dropping out, or in other words a robust deterioration of site returns to a level of circa 22%."

Shore said this is unrealistic given the strength of current trading, supportive secular trends and measures in place to control costs.

"At our fair value of 300p, the group would trade on a CY23F EV/EBITDA of 8.5x (pre-IFRS) and thus be more in line with operators Greggs and Tortilla which yield a similar CROIC per site of over 30% and exhibit an equally compelling growth story," it added.

Finally, RBC Capital Markets upgraded Primark owner Associated British Foods to 'outperform' from 'sector perform' and lifted the price target to 2,250p from 2,150p.

RBC said it thinks an improvement in Primark profitability should drive double-digit earnings growth for ABF, which is not being captured by the current valuation.

It noted that ABF trades at less than 13x CY24 estimated earnings per share, with over 80% of earnings coming from Primark, Twinings/Ovaltine and the ingredients business.

Email this article to a friend

or share it with one of these popular networks:


Note 1: Prices and trades are provided by Digital Look Corporate Solutions and are delayed by at least 15 minutes.

Note 2: RiskGrade figures are provided by RiskMetrics.

 

Loungers Market Data

Currency UK Pounds
Share Price 279.00p
Change Today -1.00p
% Change -0.36 %
52 Week High 286.00
52 Week Low 182.50
Volume 8,860
Shares Issued 103.83m
Market Cap £289.68m
RiskGrade 184

Loungers Star Ratings

Compare performance with the sector and the market.
more star ratings
Key: vs Market vs Sector
Value
77.65% below the market average77.65% below the market average77.65% below the market average77.65% below the market average77.65% below the market average
76.92% below the sector average76.92% below the sector average76.92% below the sector average76.92% below the sector average76.92% below the sector average
Price Trend
85.92% above the market average85.92% above the market average85.92% above the market average85.92% above the market average85.92% above the market average
92.73% above the sector average92.73% above the sector average92.73% above the sector average92.73% above the sector average92.73% above the sector average
Income Not Available
Growth
11.61% above the market average11.61% above the market average11.61% above the market average11.61% above the market average11.61% above the market average
49.02% below the sector average49.02% below the sector average49.02% below the sector average49.02% below the sector average49.02% below the sector average

Loungers Dividends

No dividends found

Trades for 23-Jul-2024

Time Volume / Share Price
09:59 42 @ 276.00p
09:00 1,200 @ 270.00p
09:00 1,200 @ 270.00p
08:21 1,708 @ 276.00p
08:21 460 @ 276.00p

Loungers Key Personnel

CEO Nick Collins
CFO Stephen Marshall

Top of Page