Wednesday preview: Could Boohoo results surprise?

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Wednesday preview: Could Boohoo results surprise?

Tue, 26 September 2017
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Wednesday preview: Could Boohoo results surprise?

(ShareCast News) - One of the most anticipated results on Wednesday is that of an AIM-listed online retailer, Boohoo.com, which may outshine FTSE 350 names reporting on the same day, including SSE, PZ Cussons and Grainger.
Macro data on Wednesday includes the CBI Distributive Trades Survey, where the consensus is for a 5% bounce back after 10% negative balance in August.

Amid the deluge of European data is eurozone money supply, and consumer data from Germany, France and Italy, while later there are US durable orders, pending home sales and EIA crude oil stocks.

AIM-listed Boohoo.com has, like its older cousin Asos, attracted quite a large following; ahead of its interim results on Wednesday, Barclays upgraded the already "expensive" shares, Deutsche Bank reiterated its 'buy' as did Shore Capital.

"Growth momentum has underpinned the Boohoo Group investment case over the past two years," said ShoreCap's George Mensah. "We expect this to continue after the company reports its interim results."

Most recent guidance from the company was for sales to rise around 75% on last year's revenue of £55m.

Mensah expects a strong uplift in sales and profits, forecasting revenue of £237.6m and an adjusted EBITDA forecast of £26.0m, believing guidance provided by the company is underplaying the momentum of the brand PrettyLittleThing.

Deutsche expects PrettyLittleThing to contribute to group sales growth of 85% for the second quarter after the 106% increase in the first, forecasting 83% group sales growth for the full year. For the first half adjusted EBITDA margin forecast is 10.1%.

Earlier this month, after running some online data numbers through its model, Barclays upgraded its EPS forecasts by 4% for 2018 and 2019 to sit 20% and 22% ahead of consensus EBITDA.

"Since initiating in March, it has been clear to us that Boohoo has a competitive advantage in its supply chain and ecommerce only model that will yield share gains for many years to come, but we haven't been able to get comfortable enough on forecasts to find the valuation appealing. This has changed," Barclays said.

As for FTSE 100 energy group SSE, there were fewer plaudits.

However, Credit Suisse, reporting back from a utilities sector get-together said the company was "more optimistic on growth, and once again flagging all of the growth options down the pipeline and a need to be disciplined on returns".

CS analysts' view is that the dividend is sustainable as it is backed by operating cash flow from renewable investments.

While SSE has lost retail customers recently, with around a 13% annualised run-rate across April-June 2017, it has focused on cutting cost to offset the impact of prepayment price caps.

Elsewhere, PZ Cussons is expected to make a trading statement alongside its annual shareholder meeting.

In July the consumer products group reported full year revenue fell 1.5% to £809.2m, while operating profit was down 2% on a reported basis at £106.3m in the 12 months to 31 May, and down 0.9% on a constant currency and like-for-like basis, while profit before tax was ahead 0.5% at £103.5m, or up 1.7% at constant exchange rates and like-for-like.

"Our strategy of ongoing brand innovation and renovation continues to underpin the group's ability to maintain or grow our market shares," directors said, despite consumer confidence remaining fragile "in most markets".

While the UK retail environment remains tough, broker Numis thinks the company's actions to diversify its routes to market and deliver innovation should support the forecast 4% adjusted PBT growth to £107.9m this year.

"Nigeria still remains very challenging and with several months to go before the major trading season we see little scope of an improved outlook. Asia should benefit from recent product launches in Indonesia and the actions taken to address its Australian food business."

As for Grainger, where Numis is house broker, a solid update is expected, with all key metrics showing a strong performance and further progress made in securing its £850m PRS target by 2020.

Numis forecast that net rental income will show circa 10% growth supported by robust underlying rental growth and also the impact of PRS investments, though profit on sale will fall marginally, driven by the tough comparatives from last year and forecasts of lower development profit.

Wednesday September 27

Crude Oil Inventories (US) (15:30)
Durable Goods Orders (US) (13:30)
M3 Money Supply (EU) (09:00)
MBA Mortgage Applications (US) (12:00)
Pending Homes Sales (US) (15:00)

Current Account (09:30)
Gross Domestic Product (09:30)
Nationwide House Price Index (07:00)

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