Broker tips: Asos, Aptitude Software, Britvic, Dunelm
Peel Hunt downgraded its stance on Asos on Monday to 'add' from 'buy' and slashed its price target for the stock to 5,000.0p from 6,500.0p after the online fashion retailer announced the departure of its chief executive and warned on profits.
Asos said FY22 sales growth was expected to be between 10% and 15%, with first-half revenue growth slowing to mid-single digits. This reflects tougher comparables in the first half, particularly in the UK and industry-wide supply chain pressures.
The group also said it expects FY22 adjusted pre-tax profit to fall to between £110.0m and £140.0m. If you take the mid-point of the range, this is around 35% below the market consensus forecast of £193.0m.
Peel said it opted to cut its forecast for FY22 in line with guidance to around £124.3m. The broker said confidence in the future centres squarely on Asos' ability to replicate the UK's success across international markets.
"We think Asos is extremely well placed to succeed, though expect the shares to struggle to deliver progress ahead of the CMD and appointment of a new CEO, taking our recommendation back to 'add' and target price to 5,000p following today’s downgrades," Peel said.
Analysts at Canaccord Genuity raised their target price on software firm Aptitude Software from 785.0p to 845.0p on Monday, stating it had added "more ooMPPh to the SaaS" with its acquisition of privately-held UK-based outfit MPP Global.
Canaccord, which also reiterated its 'buy' rating on the stock, said Aptitude's £38.7m acquisition of MPP Global, a subscription revenue and billing management software-as-a-service platform targeting the media vertical, equalled roughly 10% of its market cap and would be fully funded from the company's balance sheet.
Reflecting further product and organisational integration investments in 2022, Aptitude expects the unit to be break-even in 2023 and show positive earnings accretion in 2024.
Given the "competitive enterprise software M&A environment", the Canadian bank views the 3.8x last twelve months enterprise value/sales ratio and a 4.6x EV/annual recurring revenue acquisition multiple as "very attractive" for mid-to-high-teens SaaS growth.
Britvic shares fizzed lower on Monday after RBC Capital Markets downgraded the drinks maker to 'sector perform' from 'outperform' and slashed its price target on the stock to 870.0p from 1,060.0p, citing mounting headwinds.
RBC said Britvic's operating environment had significantly deteriorated.
"It's not alone in that fact but, unlike the rest of our coverage, we believe it's in a category with limited brand power and its concentrated UK footprint makes supply-chain disruption more impactful," it said.
The bank said it was reducing its FY22E margin forecasts and now lies 200 basis points below consensus.
"In addition, its valuation no longer looks attractive on an absolute or relative basis," RBC said.
Analysts at Berenberg initiated coverage on Dunelm on Monday as it took a look at a number of UK-based retailers following two "boom years" for the "home and living" sector as a result of the Covid-19 pandemic.
Berenberg highlighted that home and living activity levels had recovered sharply since the first lockdown in March 2020, driven by increased time spent at home, a change in how homeowners think about their homes, and limited options for spending discretionary income elsewhere, as access to travel and leisure had been limited.
The German bank turned to Dunelm, which it branded "the omnichannel winner", initiating coverage on the stock with a 'buy' rating and a 1,310.0p target price and noting it expects the firm to continue its market share consolidation, outperforming the market – with its "well-invested omnichannel proposition" providing a competitive advantage over its digital peers.
"Dunelm offers one of the strongest ROIC profiles in European retail and its cash-generative business should support additional capital returns. We believe that the recent downturn in the share price has provided an attractive entry point into a structural winner," said the analysts.