Superdry, Ascential, Royal Mail
Superdry was under the cosh as Liberum downgraded the stock to 'hold' from 'buy' following the recent share price move and after ex chief executive officer and co-founder Julian Dunkerton sold a 6.7% stake in the company.
ASCENTIAL
£3.13
17:35 19/04/24
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7,895.85
16:59 19/04/24
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19,391.30
17:09 19/04/24
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4,341.08
17:09 19/04/24
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17:08 19/04/24
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International Distributions Services
272.20p
16:40 19/04/24
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Superdry
9.06p
16:40 19/04/24
Dunkerton sold 5.5m shares in the group at 1,285p through a placing to institutional investors, which represents a discount of 6% to the closing price on Monday. He will pocket £71m from the sale, which takes his holding down to 18.5%. Still, Dunkerton will remain the biggest shareholder in the company.
Back in January, Dunkerton made £17.8m from the sale of a 1.2% stake in Superdry.
Liberum said the sale is "not wholly a surprise" considering his departure from the board and a senior management role at Superdry earlier this year, but it also potentially raises the question of what the ex-CEO thinks about the value of the current share price.
The brokerage downgraded its stance on Superdry on Tuesday to 'hold' from 'buy' following the recent share price move and given no near-term visible catalyst.
Liberum said the shares have done well in the past month, rising 17.5%. "We noted value at the time of the prelim results (5 July) and that this offered a good buying opportunity. This window has now passed and we move to 'hold' noting three catalysts that would make us turn more positive."
The first catalyst is earnings momentum, the second is brand vision, focus and values and the third is positive operational gearing.
"We look to see a signal that the group's move towards a more capital light model will see better conversion of sales growth into margin accretion," said Liberum.
Citi downgraded Ascential, formerly EMAP, to 'neutral' from 'buy' on Tuesday, saying the stock is up with events.
The bank downgraded its forecasts for the owner of the Cannes Lions festival by 18% to 23% on the back of the disposal of the exhibitions business.
"While there remains scope for the group to unwind this dilution by redeploying the proceeds there is just 11% upside to our sum-of-the-parts based price target of 475p," Citi said.
"One of the most attractive characteristics of Ascential in the recent past has been the systematic way in which the group has used active portfolio restructuring to enhance growth. Because of its repeated success in selling off legacy assets at a high multiple and redeploying capital into faster growing areas, we have historically had a high level of comfort in the ‘chronology’ of new sflow.
"With almost £300m of proceeds to redeploy, this optionality is still there but the issues at MediaLink undermine confidence in the visibility on further revenue acceleration. This, coupled with all-time high absolute and relative valuation (24.9x 2019E P/E), leaves risk/reward more balanced."
HSBC upgraded Royal Mail to 'buy' from 'hold' on Tuesday, lifting the price target by 5% to 550p as it said the stock's valuation was attractive again.
It noted the share price performance has been fairly subdued lately following the strong rally that followed the landmark deal with unions on pay and pensions in December last year. The shares have underperformed the FT All Share index by 20% in the last three months as estimate momentum turned negative following the full year results.
In the wake of the recent share price sell off and despite our big estimate reduction, we again see "short-term value in the shares compared to our revised target price of 550p," the bank said.
HSBC said the revamped IT system and innovative labour agreement should deliver further productivity gains and customer service improvements.
"It is difficult to overstate the importance of the now completed renewal of the group’s antiquated IT system, in our view. It has laid the foundations for meaningful improvements in reliability, as well as providing the infrastructure for enhanced customer services," it said.
In addition, the bank argued that the union deal is key to further progress.
"The unions have accepted the need for change and flexibility and are actively involved in a number of trial projects to identify more efficient ways of working. Granted that some of the productivity gains will be used to offset a progressive shortening of the working week, but we expect additional benefits beyond this."