McColl’s
Retail: One
of this year’s many new flotations. It got slightly lost in a flurry of other
issues and had a low key debut, struggling to win attention and fans. However,
it does have ‘steady Eddie’ qualities that merit a run through. Third quarter
sales (to 24th August) are up 4.3%, with year to date sales up 3.9%.
Like for like sales metrics are more movable, being -0.5% for this period and
1.2% for the year to date. In part this seems to be weather related. Whilst we
read much about the expansion of supermarket branded new convenience stores
there is another fragmented tier of existing corner shops being snapped up by
the likes of McColl’s, who also have new sites coming on stream. Of 1298
stores, 771 are Convenience and they now have 250 sites with Post Office
counters. Having strengthened the balance sheet at flotation they are also
adding sites to their network at a quicker rate. Margins are typically modest
for this type of business at sub-3%, but for the year to November 2014 Factset
reckon EBITDA will be £37.5m and debt £27.9m giving a very robust net debt to
EBITDA ratio of 0.75x, for a cash generative company. Eps could be 16.8p rising
to 18.1p the year after, a PE of just over 11x at 200p. With a dividend of
10.1p rising a reasonable 8% to 10.9p in 2015, that gives a yield of almost
5.5%. This all seems very sound value for the income investor and well worth a
second look. (28th August 2014)
These comments are not a personal recommendation to deal. Any
investments can fall as well as rise in value, so you could get back less than
you invest. I may have a financial interest in some of the stocks written
about. www.dividendpower.co.uk
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