Langton Capital – 2015-12-03 – Merlin, SAB, Meantime, holidays & 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:
Merlin Entertainment shares rise…
• We’ve been suggesting since mid-Sept (shares around 365p) that MERL looked oversold on the back of the Alton Towers accident and that the shares offered good value.
• Various market sages have suggested that you should 1) find a good company with legs and then 2) wait for an entry opportunity
• Sure, you’ll miss a few but we’ve thought for a while that Whitbread, SSP, MERL and a number of others fall into the above category. See comments below.
• 16 Sept – ‘the group does have significant roll out potential at both its Midway and LEGOLAND Theme Park divisions, and with three new Lego movies scheduled for release in 2016, 2017 and 2018, the LEGO brand could remain buoyant for some time. Execution risk is still there but momentum at the majority of the group’s operations seems to be strong.’
• 18 Sept – ‘many accommodation infill opportunities remain, ditto geographic infills in US + Asia in general…overall impression is of a co that has had a setback but which has underlying growth baked in for many years.’
• 21 Oct – China ‘JV looks like good news. 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.’
• So what’s not to like.
• Well in a ‘good’ company it’s often only the share price and, if that can be persuaded to come down from time to time, so much the better.
• So, having risen by 16% in a few weeks, is MERL a sell?
• Well, no. If we were chartists, which we’re not in the true sense of the word, then we’d say there may be resistance back on the way to 470p.
• However, and though we acknowledge that terrorism and travel-phobia could be a negative, with China and indeed the rest of the world to aim at, we couldn’t see the PER taking a serious hit in the foreseeable future.
SAB confirms Peroni, Grolsch & Meantime all for sale:
• The Battle of the Blands?
• You can almost hear the teeth being ground together.
• SAB has confirmed that, should its purchase by AB InBev conclude, the latter will sell a number of its prized brands.
• SAB CEO Alan Clark says ‘under SABMiller’s stewardship, Peroni and Grolsch have become world-renowned premium beer brands. Meantime has been a welcome addition to SABMiller and has a growing and loyal fan base. These beers are loved by consumers and we are very proud of them.’
• This appears heartfelt.
• The merger clearly is about volume. Quality, quirkiness etc. may be further down the list.
• This may present an opportunity for others – and not just for the would-be purchasers of the brands that find themselves being put up for sale.
• Indeed keeping the ‘for-sale’ brands on the rails over the next 6mths to 9mths could be quite a challenge.
• SAB knows this and says ‘until the change of control we will continue to invest in growing these great beers and supporting our talented people who brew, sell and manage them.’
Random information, hopefully not all of it useless:
• As at the time of writing (a.m. Thurs) the ECB hasn’t put rates down and the Fed hasn’t put rates up. By the time of reading, that may have changed.
• Interest rates & exchange rates. The fact that Sterling strengthened against the US$ yesterday whilst weakening against the Euro suggests that the upcoming interest rate moves highlighted above may have been more than discounted by the currency markets.
• Good day for leisure stocks in the market yesterday. MERL, DGE, GNK, GRG and ETI all in the top-10 risers of either the FTSE100 or the FTSE250.
• Millennium & Copthorne in the fallers. Not sure why.
• Tough markets. Challenging in the true sense. Healthy state of affairs as good companies should prosper. AG Barr has confirmed that trading remains challenging. It says it will hit numbers and comments ‘despite continued difficult market conditions we have maintained our market share’. Xmas is clearly critical & the co says ‘we anticipate the marketplace will remain highly competitive.’
• UK Syria attacks are not likely to boost holiday sales. A number of families may be getting out their atlases to have a quick skeg at the Eastern Med, see just where Syria is these days.
• Drink drive limit cut in Scotland anniversary tomorrow. PR battle going on. Trade associations say it’s killing pubs and others say it’s saving lives. There may be little point in saying the former as the war is lost. Though continued moaning could prompt favourable treatment elsewhere? Battle still to be fought in England, no imminent moves to cut the limit.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. SABMiller confirms AB is looking at sale of Peroni + Grolsch as well as the Meantime in the UK.
2. AG Barr updates on Q3 trading (end-July to date) saying revenues in the 18wks to 28 Nov rose by 3.9% v last year
a. AG Barr Q3: Says ‘despite continued difficult market conditions we have maintained our market share’ and ‘margins remain in line’
b. AB Barr outlook. Says ‘we are now entering important festive trading period + we anticipate marketplace will remain highly competitive.’
3. Deadline for pubs code consultation extended as House of Lords calls for MRO to be included in second legislation.
4. One year anniversary of reduction in Scottish drink-drive limit tomorrow. SLTA says impact has been “a catastrophe”.
a. Drink-drive limits. GNK yesterday said that LfLs were running +2% but that, ex-Scotland, they would have been +2.4%.
5. Whisky producer Macallan’s £100m expansion plan has been approved by Moray Council. Glenfiddich also to increase production
6. Liberation Group reported to have appointed advisors to review options going forward. LGV Capital has owned group since 2008.
7. Brown Forman reports Q2 numbers, says underlying US sales +7%, Emerging Markets +8%. Reported numbers hit by strong US$
8. UK bombs Syrian IS positions following Commons vote. Unlikely to boost holiday bookings in short term
9. Ladbrokes has been blocked by an HMRC tribunal from reclaiming £54m of tax it had sought to receive following exploitation of loophole
10. Fed Reserve chair Janet Yellen said yesterday that she was “looking forward” to US rates rising as it would be proof of recovery
a. ECB likely to announce more stimulus measures across the Eurozone later today. It may introduce negative overnight rates