Langton Capital – 2015-10-30 – Daily Wrap: Confidence levels, Merlin, pubs code, Chinese children & other:
Leisure Wrap & Other:
So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:
• CBI distributive trades survey apparently not upbeat
• GfK shows confidence waning
• Mortgage approvals down
• GNK Tracker somewhat anaemic
• Hitherto, we have maybe blamed this on de-gearing and then big-ticket spending but is this rather subdued backdrop the new reality?
Merlin – beginning to recover:
• We’ve rated MERL highly for some time.
• The Alton Towers accident has meant that the group will forego a year’s growth.
• That said, we tweeted the following on the back of its Q3 update:
o Merlin analysts’ meeting: Group reiterated that it will forego a year’s growth in FY15 but good stuff going on beneath surface
o MERL meeting: overall impression is of a co that has had a setback but which has underlying growth baked in for many years
• Following the China tie up we tweeted:
o Model is scalable, China is big and, for a company that looks set to continue delivering, 21x earnings doesn’t look like too high a price to pay.
• The shares, some 370p at the time (now 410p) were offering a multi-year buying opportunity that was arguably too tempting to miss.
• The shares have risen a little over 10% in the following month but, on balance, the shares still look very attractive.
• Both the ALMR and the BBPA have welcomed the chance to analyse in more detail the government’s intentions with regard to free-of-tie rents.
• It’s reassuring that there will be a carve out for ‘significant investment’ but, of course, that has yet to be defined
• The devil, not surprisingly, will be in the detail and, until some of this is nailed down, conclusions will be sketchy
China, two kids. Sibling rivalry to become a thing.
• This is a big deal but, as these things take a while to cook, as it were, the impact of a younger Chinese population will take years to feed through
• Holidays may become more of an issue – but they may be foregone in the short term
• Older consumers may retrench in order to provide for (a larger number of) grandchildren
• Fast food restaurants could benefit – but not for a decade etc. etc.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Pig prices now approaching multi-year lows. Red meat prices firm but white meat (pork is a fairly useful proxy for chicken) prices low, down c32.5% over the last 12mths.
• AB InBev. One of the comparatively few US$ stocks that looks good despite adverse currency translation on the back of a strong dollar.
• Ironically Starbucks, which reported overnight is another.
• So Jaffa Cakes are going to be exempted from VAT whilst bottled water still attracts a 20% tax? Go figure.
• Interestingly, unless it falls over with a vengeance, US stock markets are in for their best month since 2011
• Mortgage approvals are down. Does beg the question as to just where consumers are spending their money
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. AB InBev Q3 numbers, says revenues +7.9% in Q3 ’with solid revenue per hl growth of 6.3%’. Premiumisation has driven sales.
a. AB InBev Q3: Says ‘on a constant geographic basis, revenue per hl grew by 7.8%’. 9mth sales +6.1%.
b. AB InBev Q3: Says ‘total volumes grew by 1.5% in Q3 with own beer volumes up 2.3% + non-beer volumes down 6.1%.’
c. AB InBev Q3: EBITDA grew by 9.6% in Q3 to US$4.4bn with margin +58bps. Normalised profit was US$1.67bn v US$2.32bn last year
2. HMG yesterday launched first part of consultation into pubs code. Principle being a tied tenant should be no worse off under tie.
3. Bottler + distributor Coca Cola Enterprises reports Q3. Said earned 72c vs 84c last year on sales of $1.8bn (down 14.5%).
4. Starbucks Q4 + FY: Reports Q4 LfL sales +8% globally, +9% in US. Global traffic +4%, total revenues +18% to $4.9bn.
a. Starbucks Q4 + FY: EPS in Q4 hits record 43c, group says it is issuing a notice of the ‘Strong Outlook for Fiscal 2016’.
b. Starbucks Q4 + FY: LfLs in China/Asia Pacific +6%, driven by a 6% increase in traffic. EMEA LfLs +5%, footfall +3%
c. Starbucks Q4 + FY: Opened 524 net new stores globally in Q4. FY LfLs +7%, total sales +17% to $3.6bn.
5. Camerons Brewery is seeking a £5m refinancing package to buy 30 managed and 20 tenanted pubs over the next 5yrs
6. Street Feast parent London Union has launched a Seedrs initiative to raise £3.5m for a permanent street food market in central London
7. IAG Q3 numbers, revenues +12.5% at €6.76bn. Operating profit €1.25bn (€1.205bn excl. Aer Lingus) v €900m last year
a. IAG Q3: CEO Willie Walsh says ‘we’re reporting strong quarter results with a positive contribution from all of our airlines.’
8. US economic growth slowed sharply to 1.5% from 3.9% in Q3 according to the Department of Commerce.