Langton Capital – 2015-11-18 – Daily Wrap: Restaurant IPOs, Airbnb, terrorism, interest rates & 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:
White table cloth restaurants:
• D&D London looks to be coming to the market.
• Valuation estimates range £100m to £130m.
• The FCA is trying its best re one-sided research (in that it may have to be called ‘marketing material’) but it’s not doing anything pro-active in that indies can’t really even get the raw data to take a view.
• Hence there are unlikely to be many (if any) well-informed negative views.
• Add to that the suggestion that portfolio managers may be attracted to the stock (unconsciously) because they eat in the restaurants & there may be a risk that this gets overpriced.
• Because white table cloth restaurants are very hard to value.
• There are issues with roll-out. Franco Manca, Frankie & Benny’s etc. are eminently scalable & one can price them accordingly but the same can’t be said of Coq d’Argent etc.
• Not that that is to say they can’t be scaled, they maybe can. But it might have to be in Seattle & Singapore rather than in Stepney & Shoreditch and that brings with it potential risks as well as rewards.
• Brands such as Savoy, Really Useful Group, upmarket health spas and the like may not be quite at home on the stock market as are ‘normal’ roll-outs such as Costa or JD Wetherspoon or Pitcher & Piano.
• Or even now-unlisted companies such as Prezzo, Eat, Carluccio or Pret.
Airbnb is probably not going away:
• The fact that American Express is to facilitate Airbnb transactions is newsworthy.
• This because Amex will have to stand behind the transaction(s) should anything go wrong and it will have undertaken some DD before making this commitment.
• Hence the deniers may have to take their heads out of the sand at some point.
• Airbnb is likely to be a permanent feature in a travel industry already having to cope with the wave of disintermediation kicked off by the budget airlines.
• Nobody said making money in travel would be easy. The only constant is change.
Terrorism & Leisure Travel:
• News that the Tunisian authorities have foiled another potential terrorist outrage may only serve to focus attention on just how (potentially) dangerous North Africa can be with regard to leisure travel.
• Incidents have happened in the past and markets have recovered but this will not happen overnight.
• Operators will have put in place alternative destinations and, even with absolutely the best will in the world, North Africa will not recover for two or three seasons.
• A more likely scenario is that tourism to the region could have been set back by half a decade – and easily more.
• To tour operators, this is a fleeting (though expensive) transitioning problem. For owners of hotels and restaurants in resort, it is clearly a much bigger issue.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Enterprise Inns’ shares up yesterday on relief at group moving into execution phase of its recovery. Shares only really re-gaining what they had lost on Monday. Shares unchanged in early Weds trading.
• Whitbread shares moving around a bit. Up 3.3% yesterday + now down 1.1% in Weds trading.
• Betting on a Fed rate rise in December now 68% (per IG Index). Betting had been in the 90s a couple of weeks ago.
• It’s easy to forget just how large Walmart is. It turned over $122bn in Q3 alone.
• Nielsen has said that the UK supermarket industry as a whole suffered its largest drop in sales for over a year in the 4wks to 7 November.
• Big ticket spending. SCS says it has made ‘a good start to the current financial year’.
• Sterling stable, oil price down a bit, most commodities soft (exc. El Nino products) and copper weak overnight.
• The Bank of England has said that 80% of its shortfall in inflation (the 2.1% difference between +2.0% and negative 0.1%) is due to price movements that may reverse.
• Meat wholesale prices under severe pressure. Feeder cattle price down 21% over last 12mths & lean hog price down 39%.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Restaurant Group D&D London is closing in on a £100m IPO and could float as early as next month. Some brokers going for >£120m
2. Risk Capital buys majority stake in Brighton coffee chain Small Batch Coffee. Existing management to remain in place
3. Mexican chain Chilango receives one-off investment of £250,000 on Crowdcube page, takes total funds raised on platform to £1.8m
4. New IWSR figures indicate the global spirits market is set to grow at a compound annual growth rate of just 0.6% to 3.2bn nine-litre cases by 2020
5. Office for National Statistics says that beer, wines and spirits all contributed to a 0.1% fall in CPI in October
6. UK food and drinks supplier Princes is investing £15m in redeveloping and expanding its Aqua Pure plant in Cumbria.
7. Aldi + Lidl now own combined 10% of British grocery market + attracted 1m more shoppers in the last 12wks v last year
8. US retail giant Walmart has posted net profit of $3.3bn for the three months to the end of October, down from $3.7bn a year earlier
a. Asda LfL sales tumbled further 4.5% having fallen 4.7% in the previous quarter reports parent company Walmart
9. Police in Tunisia are reported to have foiled a new beach terror plot. Such news (from the BBC) will do little to encourage tourism
a. Russia’s security officials have found ‘traces of foreign explosives’ on debris from the Airbus that exploded over the Sinai in Egypt
10. Airbnb has teamed up with American Express in a deal to allow Amex customers to use loyalty points to book with the accommodation platform
11. UK inflation remained at minus 0.1% in Oct amid reports that the global economy has been weakening.
12. Oct 2015 is 1st time CPI has fallen on an annual basis for 2mths straight since the index was created in 1997
13. US consumer prices increased by 0.2% in October following two months of decline, with prices being pushed up by energy costs
14. House prices rose by 6.1% in the year to Sept per ONS compared with negative CPI. Annual rate was 12% just a year ago.