Langton Capital – 2016-02-01 – Daily Wrap: JDW, Whitbread, oil, Punch & 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:
Déjà vu: JDW still buying shares back:
• JDW still buying shares back & it turns out the £3.8m that the group spent buying its shares back at 613p on 20 & 21 January was money well spent.
• Not likely that the vendors of the stock will feel the same way, however.
• As mentioned last week, JDW is going on with its buyback as high as 672p. It has now spent £4.45m buying back stock at a very attractive average price of 619p.
• The co is putting its money where its mouth is. Actions speak louder than words, etc. and it is clear that JDW currently believes its own shares offer better value than does spending the equivalent amount of money on new pubs
• Any shareholders who would prefer to see a special dividend 1) will have to wait in line and 2) should know better than to wish for such things in the first place
• Silly, but it may be worth remembering that WTB is a February year end.
• Hence FY16, the year to which people most frequently look when discussing valuation, is about to end.
• WTB’s shares trade at around 17x FY16 but a ‘much-more-reasonable’ 15.1x earnings for Feb 2017
• Observers will be concerned that Costa could stall in China and/or the UK hotel market may be on the turn
• But the group, unlike most UK leisure stocks, has brands with international potential and its shares are down by around 27% from their mid-2015 peak of £55.
• Rally has built upon itself & Brent now trading at >$35.
• This is still pitifully low on a medium view but, compared with the c$27 rate seen a couple of weeks ago and talk that it was headed straight to $20, it does qualify as something of a rally
• Given that shares have been reacting in a rather unsophisticated manner recently, it would not be surprising to see travel stocks, TUI, IAG, CCL etc., give back a bit of ground on what looks like a sustained upward move
Random information, hopefully not all of it useless:
• Interestingly, Punch shares have outperformed those of Enterprise by as much as 40% over the last 12mths
• Fuller’s share price has been outperforming that of Young & Co recently. We believe that trading at both companies will have been much more similar than it will have been different.
• See our LRI and FRI in earlier email. High beta stocks, or at least those that have had major falls recently, performed last week. We’re thinking of Domino’s and Pat Val in the leisure space and Bookers in the FRI.
• The additional Morrison’s price cuts of up to 20% will put more money back into consumers’ pockets.
• UK equity market tried to go better this morning. Forecast to open 49pts higher, it’s down around 30pts at time of writing on China fears.
• Sunday Telegraph has flagged up that Lidl has ramped up its expansion plans in the UK by issuing almost three times as many planning applications as Aldi for new supermarkets in the last quarter of 2015.
• Sluggish economic growth in both the US and UK (and in China) suggests that interest rate increases may come later rather than sooner
• UK All Share Index said to be close to its 50dy moving average.
• Sterling settling. Seems to have bounced off recent lows, re-tested & bounced again. Could be stable for a while at these admittedly lower levels.
• Commodities showing a bit of life. Admittedly many of them are lapping weak trading a year ago. Gold price, though still down 9% over the last 12mths, has recently been showing a bit of life.
• Cocoa rolled over but sugar still strong. Cocoa up 6% over last year but down sharply on 3mths. Sugar up 12% on a 12mth view.
• Soy (an input cost) still very week but pig prices (proxy for white meat) showing signs of life & now up 2% over the last 12mths
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. JD Wetherspoon has announced that it Friday bought back a further 34k shares for cancellation at 672p
2. Conviviality reports H1 numbers, says revenue +38% at £252m, EBITDA +43% at £6.5m. PBT +19% at £3.8m
a. Conviviality earns 3.8p per share (+3%) in H1. Increases interim dividend by 5% to 2.1p per share
b. Conviviality: Says ‘integration of Matthew Clark ahead of plan’ and says LfL sales +0.8% over the H1 period.
c. Conviviality: Re Xmas, says ‘strong Christmas trading in the two peak weeks to 3 Jan with Group sales growth 13% above last year’
3. Pernod Ricard is to acquire the majority stake in Monkey 47, the German gin brand, after signing an agreement with Black Forest Distillers
4. BrewDog has raised £13.5m so far in its Equity for Punks IV crowdfunding campaign launched last April
5. Landlords have warned that the new late-night levy in Camden as it ‘could kill the borough’s nightlife’.
6. ‘Super budget’ branded hotel operator easyHotel’s Benelux franchisee has purchased a 131-room property on Arena Boulevard in Amsterdam
7. Morrisons is cutting prices of >1k products for a minimum of 3mths and will use its own fresh food manufacturing to keep costs down
8. Tesco is to stop 24-hour trading at 76 of its biggest stores and just under a quarter of these will now close from midnight to 6am
9. Some US unicorns limping badly. Zynga (social games) now down 75% from IPO, Groupon down 85%. Even Twitter 30% off
10. US economy grew at an annualised rate of 0.7% in Q4, down from an annualised 2% in Q3.
a. Slower US growth diminishes chance of four rate rises this year. First realistic test will be March
b. Eurozone headline inflation up slightly. Core inflation, ex food & energy prices, only up by 1.0% in Jan versus 0.9% in Dec
c. CBI says UK economy growing at slowed rate since mid-2013 in 3mths to end-Jan, says has had “tough start to the year”.