FTSE 250 movers: Currys in favour; Alphawave tanks on results
By Frank Prenesti
Date: Monday 23 Sep 2024
(Sharecast News) - FTSE 250 (MCX) 20,869.57 0.18%
Electrical retailer Currys was up 7% after Berenberg lifted its price target for the stock to 125p from 92p as it pointed to confidence in both the growth outlook and improving cash generation.
The bank noted that Currys' share price sits about 45% below pre-Covid levels despite its stronger financial position and an increasingly optimistic outlook.
"The FY 2025 estimated price-to-earnings ratio of 8.2x gives no credit for earnings upside from here and represents a circa 40% discount versus major direct peers," it said.
"It is arguable that the combined value of Currys' services revenue (circa £700m of recurring, higher-margin sales) and its iD Mobile network (over 1.9m subscribers and up by 34% year-on-year) alone accounts for the entire current group market cap."
Berenberg noted that Currys' turnaround plan has cut total indebtedness by more than £700m over FY 2019-24 and delivered April 2024 year-end net cash of £96m.
"This financial discipline, a clear strategy and right-sized cost base, will continue to support normalised capex levels to drive growth," it said. "At the same time, we forecast the pension deficit to be eliminated in FY 2027E, at which point contributions cease."
The bank said this will drive a step-up in free cash flow to equity to circa £100m in FY27E and over £150m per annum thereafter.
"All of this can be achieved while maintaining a growing net cash balance sheet, which has already given management confidence to announce a resumption of dividends in the current financial year.
"While we wait until the dividend is declared, we see scope for a yield of c4% to appeal to income investors."
Berenberg rates shares of the electricals retailer at 'buy'.
Shares in Alphawave IP dropped by almost a third after the connectivity solutions group swung to a loss in the first half while revenues halved, blaming an "expected strategic change in business mix" and the timing of specific customer programmes.
While the firm signalled a big improvement in fortunes in the second half, that didn't stop the stock from dropping to a 52-week low of 70.6p in morning trade, down 44% on the day. By 1108 BST, the share price had risen to 91.6p, still down 27% from Friday's close of 125p.
The company, which provides semiconductor IP solutions targeting the datacentre and internet of things devices markets, reported an adjusted EBITDA loss of $11.8m for the six months to 30 June.
Revenues dropped to $91 from $187.2m a year earlier, with licence and NRE revenues falling 11% to $64.8m and royalties and silicon revenues sinking 77% to $26.2m.
Alphawave IP said the decline reflected an "expected strategic change in business mix" including revenue from IP licences and silicon, and a significant reduction of the legacy business in China.
Meanwhile, the bottom line was also held back by continued research and development investment in chiplets and new silicon connectivity products, with the latter expected to begin shipping this year and ramp into production in 2025.
Looking ahead, the company said that anticipated "tape outs" - the final design stage before manufacturing - of certain application-specific integrated circuits and the timing of conversion of IP and NRE bookings into revenue is expected to help drive "significant revenue growth in H2 2024 compared to H1 2024".
Also adding to its optimism was a 20% increase in total bookings in the first half to $225.3m, due to "increased design win momentum across the vertically integrated semiconductor business".
"In the first half of the year, we have continued investing organically to support our pipeline and future revenue growth. Our leading connectivity technology and strong execution give us confidence in the prospects for our business in the second half of 2024 and beyond," said chief executive and president Tony Pialis.
Market Movers
FTSE 250 - Risers
Currys (CURY) 84.85p 8.23%
IntegraFin Holding (IHP) 373.50p 3.89%
Auction Technology Group (ATG) 416.50p 3.22%
Baltic Classifieds Group (BCG) 291.00p 2.65%
PPHE Hotel Group Ltd (PPH) 1,280.00p 2.40%
Domino's Pizza Group (DOM) 296.00p 2.35%
Wetherspoon (J.D.) (JDW) 724.00p 2.04%
Paragon Banking Group (PAG) 755.50p 1.96%
SDCL Energy Efficiency Income Trust (SEIT) 64.90p 1.88%
Dunelm Group (DNLM) 1,233.00p 1.73%
FTSE 250 - Fallers
Close Brothers Group (CBG) 403.20p -6.45%
Bridgepoint Group (Reg S) (BPT) 323.00p -4.89%
NCC Group (NCC) 169.20p -4.62%
Aston Martin Lagonda Global Holdings (AML) 159.20p -2.51%
Hays (HAS) 91.45p -2.51%
W.A.G Payment Solutions (WPS) 82.00p -2.38%
SThree (STEM) 396.00p -2.34%
Apax Global Alpha Limited (APAX) 144.00p -2.17%
Great Portland Estates (GPE) 364.50p -1.88%
Kainos Group (KNOS) 870.00p -1.81%
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