Broker tips: the Gym Group, Coca-Cola HBC
By Iain Gilbert
Date: Friday 12 Aug 2022
(Sharecast News) - Analysts at Berenberg slashed their target price on fitness centre operator the Gym Group from 290.0p to 180.0p on Friday and said it was "staying on the sidelines" as far as the stock was concerned.
Berenberg downgraded the Gym Group to Hold in November 2020 as it felt that like-for-like revenues could take longer than expected to rebuild to 2019 levels, which it said would, in turn, have "a large impact" on earnings given the level of operational gearing in the business.
"While the valuation has become more sensible since then, we still struggle to have conviction on the outlook, particularly while the company is reducing its disclosure of certain KPIs," said Berenberg.
The German bank also said it was taking the company's capital markets day targets of underlying earnings of £95.0m-105.0m and pre-tax profits of £40.0m-50.0m with "a pinch of salt".
"We think the company can certainly grow EBITDA as it continues to open more gyms. However, our only gripe is that management has refused to say how many gyms it will deliver this from. In other words, it could reach the target by ramping up capex and opening significantly more gyms than current guidance - which may look less impressive if the unit economics have not returned to 2019 levels," said the analysts, who reiterated their 'hold' rating on the stock.
Analysts at Deutsche Bank raised their target price on bottling company Coca-Cola HBC from 2,525.0p to 2,600.0p on Friday, stating the stock was "still going cheap" despite recent strong growth.
Deutsche Bank said Coca-Cola HBC's first-half earnings signalled the firm's "biggest beat so far, with its results standing out even in the context of a European Beverages earnings season where every company has beaten so far.
"CCH's 6.7% revenue beat was the third best this season (out of seven) and its 33.2% EBIT beat was 2x the next best (Campari) out of six companies to have reported EBIT," said DB, which reiterated its 'buy' rating on the stock.
"The company also reintroduced guidance, which suggests 2-12% upside to consensus EBIT in FY22."
Reporting by Iain Gilbert at Sharecast.com
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