Gear4music (holdings) Share Discussion Threads

[fruitninja84] 18/10/2016 08:53

@ali47fishStock over-hang, looking back over the trades the past few months there has been a big steak build imo. Perhaps a bit of profit taking with new buyers absorbing the shares. £4 is my January target but we will see..

[jpsmithson] 18/10/2016 08:53

Its non stop buying this morning so as the price is currently down I would suggest that a large sell order is being worked through.

[kcr69] 18/10/2016 08:52

No doubt about it, a great set of results with earnings at £750m (eps 3.7p), pretty close to my mid level estimate of £779m. On that basis, and given the positivity of the outlook update, it would suggest full year 2016 / 17 earnings will be around the £2.5m mark, rating the current share price on a slightly ridiculous PE multiple of only 25 times for a business with 2 year growth prospects well in advance of 50%.

I still believe a forward earnings multiple of 40 is extremely conservative for the business and maintain a belief that a share price of £4.50 - £5.50 will be seen by Xmas 2016, if not in the coming days and weeks, irrelevant of what happens with the share price today. With an initial stab at 2017/18 earnings at £3.5 - £4.0m a share price heading towards £8 by end of 2017 looks completely reasonable.

@paulypilot. Paul, I believe you said that you are seeing the management team today. Two points from me with regard to the interims if you get the opportunity. Gross margin at 26.6% was a full 1% higher than H2 2015/16. Would be good to understand if this is solely currency driven or backed by more fundamental actions.

Labour costs increased by £200k (approx 13%) from H2 2015/16 on approximately the same revenue. While this is clearly part of the growth strategy, it would be good to understand more about future labour cost growth and the upper limit as a % of revenue that is being targeted.

All in all, the story remains as strong as ever and I remain hugely bullish.

Best wishes all.

[ali47fish] 18/10/2016 08:49

what does that mean johnyee- you mean its cheap?

[fruitninja84] 18/10/2016 08:47

What jumped out at me reading the results this am was this line .. - Property lease signed on German Distribution Centre.Looking at Edisons research note quickly Thomann is G4M biggest European competitor with 12.8% market share and over 500M turnover. The company is also German so interesting that Gear4 are setting up shop here ... All imo, just food for thought.

[johnyee 7] 18/10/2016 08:45

I can buy and sell for 310,never seen that before

[ali47fish] 18/10/2016 08:43

can anybody explain why the share price is not shooting up on these results or am i missing something - please someone hasard an opinion

[ramridge] 18/10/2016 08:39

Alphabeta4 - Thanks for the detailed info. Fully agree.
I think we should not be hung up on pe ratios for this type of share. For companies showing strong sales growth, strong eps growth, good margins and ability to gear up (no pun intended) their operating model, then pe becomes irrelevant.
Consider BOO, Asos, etc . G4M has a tremendous opportunity to grow in the EU.

[johnyee 7] 18/10/2016 08:32

over the odds just paid for 1500 shares

[alphabeta4] 18/10/2016 08:23

Just to expand on that Ramridge using an extract from my post no38 I did last month (ignore the PE as this was from when it was c£2.40):

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The company has clearly had a strong first six months, growth was 66% for the first 4 months and 73% for the first six meaning growth was 80% for the last 2.

At 70% the company would hit Edison's 2018 forecast from page 4 of the note below with sales of just over £60m.



Their profit after tax for this outcome is just over £2m which would equate to a PE of 22 for the current year.
--------

We now have the net profit figure for H1 which came in at £750k on sales of £21.6m. On the same margins this would mean £60m would equate to £2.08m. At £3.10 this would equate to a forward PE of exactly 30. The plus point is this is likely to be a conservative estimate as this is ignoring margin improvements from the marketing as a cost of sales and labour as a cost of sales lines:

(From today's statement):

Financial KPIs

H12016/17 H1 2015/16 Change

Revenue GBP21.61m GBP12.49m +73%

Adjusted Operating profit/(loss) GBP888,000 (GBP146,000) +GBP1.03m

Marketing costs GBP1.76m GBP1.17m +50%

Marketing costs as % sales 8.2% 9.4% +120bps

Labour costs GBP1.73m GBP1.16m +49%

Labour costs as % of sales 8.0% 9.3% +130bps

From here we can see an improvement of just over 1% on both measures. For £60m sales for the year there would be £38.5m to go. This is going to be hard to estimate but if say a 1% improvement is achieved again on each in H2 then we get £2.08m + (£385k x2) = £2.85m. With a current market cap of £62.48m this would give a forward PE of 21.92.

So depending on margin improvements on the current growth rate the forward PE will be a max of 30 and potentially in the early 20s. There's still some massive upside here IMHO as this remains far too low for the growth profile.

[fruitninja84] 18/10/2016 08:09

I'm unable to get a quote to buy (Barclays) must be a grain of demand ...

[tattooed93] 18/10/2016 08:07

Upgrade from Hold to Buy (BUY)

[ali47fish] 18/10/2016 08:06

i cant add -an error saying contact dealing desk

[ramridge] 18/10/2016 08:02

Excellent results. One snippet.
If you look at the 2H revenue weighting for FY2016, they did almost 2x the revenue of 1H. Xmas period of course.
So that implies roughly sales of £60m for FY2017. This is way over broker forecast of £47m. Earnings upgrade is IMO near certain.

[bigbigdave] 18/10/2016 08:00

Called opening down, must be a determined seller about. Think I might take advantage :o)

[battlebus2] 18/10/2016 07:55

Edison have a new note out.

[johnyee 7] 18/10/2016 07:29

If only all updates were as good as that.

[shauney2] 18/10/2016 07:28

Not too shabby.If the growth rate continues these are still looking very cheap.

[flyposter] 18/10/2016 07:26

Also... "Additional worldwide shipping destinations added"

[saucepan] 18/10/2016 07:19

No two ways about it: these are terrific results with an "ahead" statement to boot, nicely inserted as a lovely little touch at the end.

The insight that EU sales were comprising as much as 40% of revenue in the last two months of the period is also very exciting. They may even be the larger part of revenue by now.

[battlebus2] 18/10/2016 07:11

Let's blow our trumpets...Excellent results and outlook

[hydrus] 18/10/2016 07:08

'given the strength of first half performance coupled with continuing momentum heading into the important Christmas period, the Board considers the Group well placed to deliver results for the full year ahead of its previous expectations.'

[thevaluehunter] 17/10/2016 13:35

No rent, rates or staff compared physical store should give them the edge on pricing. I think they are spending a bit on adwords so there is potential for margin expansion once the sales and customer base grows.

[thevaluehunter] 17/10/2016 12:26

I think this one looks quite cheap actually considering the growth rate.