Langton Capital – 2015-12-14 – Daily Wrap: Outlook for 2016, Merlin, Fosun & 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:
BDO predictions for 2016:
• The problem with identifying your top ten predictions is that there need to be 10 of them.
• This risks obscuring the fact (or Langton’s belief) that you really believe in six or seven of them – but have put the other three or four in simply to make up the numbers.
• Hence it seems reasonable to suggest that grab and go will expand and that prices will, at some point, begin to edge up.
• But the idea that there may be more IPOs is a hostage to the state of the market (D&D may be pulled if Sky News has got its facts right) and the imposition of a sugar tax is in the gift of your local politician.
• London may or may not remain strong but it’s surely unlikely that 2016 will see the end of tipping in the UK.
• Similarly, we consider that ping pong, trampolining and other activity-based units may have a limited appeal.
• Likewise tapas. Unless one means by tapas ‘sharing dishes’, which we consider likely to continue growing in popularity.
• Not featured are suggestions such as a property cost backlash or permanently lower margins driven by the NLW, new entrants and the occupancy costs just mentioned
• Not mentioned either is the potential for a crowd-funding scandal, bust or blow-up.
• Corporate activity, we would suggest, is likely to remain a feature as new entrants bulk up and some of them choose to exit via sale.
Merlin – continues to recover:
• Share price continues to recover.
• It was one of only 4 stocks in the FTSE100 to finish in positive territory on Friday.
• See earlier emails for fuller comment but we would expect the shares to recover to last year’s highs in the next few months.
• Alton Towers’ accident may have caused shares to give back a year’s movement – but that’s not the case on the ground where real progress will have made.
• Would not therefore be surprising to see the pace of share price move pick up slightly to make up the they year in the doldrums.
• We maybe shouldn’t mistake this for a new normal as growth (at least in the share price) could slow a little thereafter.
• Found him.
Random information, hopefully not all of it useless:
• Tesco shares trading at 18yr lows. At some point they will offer good value. However, at the moment, the caution that one should not attempt to catch a falling knife seems somehow appropriate. See earlier emails for comments on Tesco’s largely loss-making attempts to diversify away from mainstream grocery retailing.
• Evolution continuing (both ways) with Domino’s looking to build a 60-seat restaurant.
• Greene King shares gave a meaningful bit back last week. They weren’t alone.
• Tesco has joined Morrison’s & ASDA in offering petrol at less than £1 per litre. Should help consumers conserve cash
• Sterling down a little vs US$, up vs Euro. All eyes on the Fed meeting later this week.
• Oil blisteringly low. Trading at around $37.70 early doors, 11yr lows. RDSA share price etc. says it all. Big questions being raised about sustainability of dividend across a number of players in the sector.
• Of the best ten performing FTSE100 shares on Friday, only four actually posted share price gains.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. BDO Restaurants & Bars Report highlights General Election as the event of 2015 with National Living Wage close behind
a. BDO suggests ‘the deals market has again proved to be particularly active’ with crowdfunding now a feature
b. BDO says ‘rents & and property costs in general are also always forefront of operators’ minds’.
c. BDO says businesses are even more cautious than consumers but restaurant + bars sector continues to defy the rest of the economy
d. BDO forecasts for 2016. More IPOs, more grab + go products, the end of tips but the arrival of a sugar tax
e. BDO forecasts: Rising prices, a strong London, more tapas and growing numbers of active (ping pong, golf) type venues
2. AB InBev has announced its intention to list its shares on the Johannesburg Stock Exchange in mid-January 2016.
3. Morrison’s has announced that Greene King CEO Rooney Anand is to join its board as a non-executive director.
4. D&D Restaurants has put its IPO on hold until next year after failing to secure adequate fundraising commitments despite ‘strong’ investor appetite
5. C&C Group has entered into a long-term distribution partnership with Pabst Brewing Company to sell its cider brands in the US
6. PE group KKR has supported a debt refinancing of 290-strong Casual Dining Group
7. Research from the University of Southern Denmark suggests that a pint of beer of a glass of wine a day could lower the risk of death by dementia
8. Amazon has rolled out one-hour delivery on wine and items from Eataly in New York with its Prime Now service.
9. Domino’s Pizza Group has submitted plans to open a 60-cover restaurant and takeaway site in Kent.
10. easyHotel confirms it has received planning permission to build a 77 room easyHotel in Liverpool. It is expected to open in 2016/2017 FY
11. The Times writes that the owners of Travelodge have suspended the budget hotel chain’s £1bn auction until after the New Year
12. Fosun, which owns 5% of Thomas Cook and which is set to buy 5% more of the company, has found its chairman
13. Oil prices extended losses Friday, doing little better today. Selling at around $37.70 per barrel. Hits 11yr lows
14. Rightmove reports UK home prices fell back by 1.1% in Dec following 1.3% slide in November