Moderator: CIC officers
Sun 09 December 2018 17:15
In her 'Inside the City' column for the Sunday Times this week, Sabah Meddings was looking at tenpin operator Hollywood Bowl, saying that the firm was leading a "quiet revolution" in the leisure sector with a reputation for sticky floors, sweaty shoes and seedy establishments.
The company operates 58 bowling alleys across the UK, with most of them located adjacent to cinemas, and floated in 2016 with a valuation of £240m.
Its shares did have a rocky start to publicly-traded life after private equity firm Electra sold out, but they recovered and ended up rocketing to 234p in May.
Recently, however, they had wavered, closing at 183.5p on Friday - giving the company a valuation of £275.3m and providing what should be a buying opportunity, Meddings wrote.
Hollywood Bowl is set to report its full-year results on Monday, with analysts anticipating another special dividend after shareholders were treated to a 3.33p per share distribution last year.
This year's Christmas present was expected to fall between 3.5p and 4p, according to Shore Capital.
Meddings said part of the reason for the share price's recent drifting was an increasingly difficult consumer climate this year, with a stiflingly hot summer and the Football World Cup keeping families outdoors.
But Hollywood Bowl was still performing well, she said, right as the leisure sector was continuing to outperform its retail counterpart for its share of consumer spending, with British families appearing to now value experiences over the accumulation of more things.
The company remained cash-generative, with the board keeping a lid on costs to ensure a solid dividend yield, with Meddings saying it was expected to be 3.9% this year.
Revenue and earnings were also on track, with the firm expected to turn over £121.3m this year, up from £114m, and pre-tax profits set to hit £23.3m.
Hollywood Bowl was not resting on its laurels when it comes to locations, either, with new bowling alleys opening in Dagenham, Yeovil and Watford.
A new centre set to open soon in the Intu shopping centre at Lakeside in Essex would be the largest one to open in the UK for a decade, and would be ideally located right next to a Nickelodeon-themed indoor amusement park.
The company's scale was an advantage, too, with 173 of the UK's 309 tenpin bowling alleys currently run by independent operators, in groups of five sites or fewer.
Meddings said the company was ideally-placed to invest in technology such as online bookings to keep its costs lower and maintain family-friendly pricing.
"Investec has a 255p target on the company, while Berenberg and Peel Hunt are predicting 250p," Meddings noted.
"The recent dip in the share price gives investors a chance to get on board. Buy."
Over in the Mail on Sunday, Joanne Hart was looking at a stalwart sector of the British high street - pawnbrokers - for her 'Midas' column, describing operator Ramsdens as "thriving", with its £1.66 share price a "bargain".
Hart noted that its list of locations was growing, with customer numbers increasing and still plenty of room for the group to expand.
She also said the balance sheet was "rock solid", suggesting shareholders could expect decent dividends for the foreseeable.
The company was not just a traditional hole-in-the-wall pawn operator, with it offering bureau de change services and new jewellery alongside unclaimed pawn items and second-hand jewellery.
It was also well into the 21st century with a growing online operation, with Hart saying its online jewellery division was making "particularly strong progress", with sales up more than 120% in the first half of the financial year.
Ramsdens published its interim numbers last month, reporting a 10% improvement in revenues to £24m and a 4% rise in gross profits to £16.7m.
Its jewellery profits were 23% higher year-on-year, with its pawnbroking and precious metals purchasing operations also showing "steady progress", according to Hart.
The company's pre-tax profits did slip 3% to £5m, but this was put down to investments in new store openings and staff training, with the board lifting the interim dividend to 2.4p.
Ramsdens had some aggressive expansion plans, with the North of England-focussed chain set to have opened 12 new stores in the current financial year and planning similar numbers for several more years to come.
Hart noted that recently-opened stores had outperformed management expectations, with the group as a whole attracting 0.8 million pairs of feet through the doors each year.
Recent payday loan problems in the sector had benefited Ramsdens, too, weakening its competition, as the company only lent money against pawn items, with 85% of customers paying their debts and reclaiming their jewellery.
It was also keeping up with industry trends, with its now offering travel cards as the tendency to take out several hundred pounds worth of foreign cash waned in the era of card-based payments.
Hart said chief executive officer Peter Kenyon, who joined the then-tiny group in 2001, took a lot of time to ensure the firm's locations were in ideal places and were priced well.
Kenyon is a banker, she wrote, and was known for his caution, which was supported by the equally-cautious board, itself stacked with ex-chartered accountants.
"Brokers expect annual sales to rise at least 12% to £45m with pre-tax profits flat at £6.5m, rising to £7 million in 2020," Hart said.
"A dividend of 7.1p has been pencilled in for the current year, increasing to 7.8p in 2020."
Sun 16 December 2018 16:35
GVC Holdings was a 'buy' for the Sunday Times' Inside the City column, with the shares trading on an undemanding multiple of 8.8 times forecast earnings and the business appearing "well placed" to cope with the prospect of an online gambling tax and a ban on TV advertising.
This week the shares, which are down 22% over the past 12 months, received a boost this week, thanks to a canny clause inserted in the takeover of Ladbrokes Coral earlier this year. When MPs vote on Monday to enact legislation to reduce the maximum stake allowed on fixed-odds betting machines from £100 to £2, it will result in the group's bettings shops being a lot less profitable. As part of the takeover, GVC offered to pay another £676m to Ladbrokes former shareholders if the law did not change before the end of March. But this deadline now looks almost certain not to be missed, meaning GVC can keep that cash.
For 2018, the group is targeting £3.5m of sales and underlying profits of almost £740m. While the future UK business will be hit by the FOBT changes, across the pond the company has been one of the first movers in taking advantage of the legalisation of sports betting via a tie-up with MGM Casinos. Some analysts forecast GVC could have sewn up around a quarter of the US market by 2023.
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