Gear4music (G4M LN)
Follow to open report
Retail | Corporate Client
Mkt cap:
£27.3m | CP: 130p | TP: 245p
Turning up the volume – add to playlist
G4M has successfully improved margins, profitability and FCF. Alongside w/c optimisation, there has been a significant reduction in ND, which we now expect to reduce to nil in 2 years, addressing a pivotal issue for many investors. Enhancements to its tech platform and customer proposition have been made, and strategic initiatives are now starting to bear fruit. This gives management the confidence to refresh its growth strategy, which points to a 3-year EPS CAGR of c70%. Trading on 3x EV/EBITDA and with a PEG <0.2x now is the time buy, with a near 90% TSR on offer compared to our target price which has been raised for a 2nd time to 245p.
Analysts:
Matthew McEachran: Direct: +44 20 7496 3076 | Email: Matthew.McEachran@singercm.com |
Excellent update Singer lifts target to 245p 11% line traded yesterday, seller must be kicking himself. |
Figures tomorrow. The best recovery stock on AUM. Abs a takeover target |
That's quite a chunk gone through at the close. Overhang gone. Interested to see who has picked up that 10% holding |
when are the results due |
Softer sales but offset by higher margins. |
Limit set at 1.2. Will look to build a position. |
so what 's the prospects from tomorrow's results here |
New Progressive note today
hxxps://www.gear4musicplc.com/media/1333/g4m-20240424-fy24-trading-in-line-and-debt-reduction-ahead-of-market-expectations.pdf |
Delighted to see that this continues in recovery mode - being a happy customer I can testify to the product and the service. Chart looks poised though I do not hold currently. |
A classic recovery stock as costs fall. |
 Singer has new 199p target
Gear4music (Buy) - has released its Y/E update today and it should be well received. Despite well-documented market challenges, marginal sales declines in Q4 mark an improvement on Q3 and both revenue/EBITDA are in line with expectations. More importantly, it made further progress reducing stock, afforded by cost savings. This drove a £4.5m FCF beat, halving ND to £7m and addressing a pivotal issue. Leverage is now <1x and it still retains £7m freehold. Good strategic progress has been made and profits are not market dependent. The board succession plan announced today looks orderly and should ensure a smooth transition. Ken Ford (CH) and Dean Murray (NED) are to step down after 9 years. Founder/CEO Andrew Wass moves to Exec Chair and Gareth Bevan (CCO) is promoted to CEO. He has 25 years’ industry experience and been with G4M for 12 years. Neil Catto (REVB, ex BOO) joins as NED/SID and the search for another suitable NED is underway. We say Buy on 3.6x EV/EBITDA, and the FCF beat feeds through to an upgraded 199p target price. |
Management have done a great job focussing only on profitable sales and debt reduction. One to lock away imho |
They could sell out to Thomaan or Amazon with one phone call but they see plenty
of future growth when they start trying to rebuild European sales. |
Saracen, you're welcome. It seems that Paul Scott was wary at last statement, saying this:
"A loss of £(1.9)m in the seasonally quieter H1, worse than £(1.0)m in H1 LY.
Outlook is in line for FY 3/2024, driven by higher gross margin and cost-cutting, offsetting lower volumes. Strategy is to prioritise profit, not revenue growth, which makes sense to me.
Balance sheet is a bit too dependent on the £24m bank loan for my liking, although overall asset backing is OK, and inventories are high before Xmas.
Paul’s view - it’s difficult to get excited about this company, now the exciting growth has disappeared. I don't see any evidence that previous acquisitions have added value. That said, a £25m market cap leaves scope for a re-rating in the next bull market. FY 3/2025 should benefit from the hefty central cost reductions (IT team scaled back). I can see merit in both bull, and bear cases, so I’ll sit on the fence. AMBER it is for now. I wonder if mgt might tire of the listing, and take it private?" |
Thanks for the feedback Brucie . Years of capex over so strong recovery play.
A buyer, or buyers are hoovering up every share sold and house broker Singer is looking for stock |
Ordered a trumpet online - very pleased with the product and service. Totally straightforward, no frills, but what I needed.
I notice this part of Bluesky ventura's 2024 selection, along with a couple of other ideas that I also hold.
The chart looks promising; it gets two screens on Stocko and an overall rank of 97, which is outstanding. The negatives seems to be ROE and ROC; and of course, no dividend.
I don't hold but definitely on the watch list now! |
Trading Update update for the three months to 31 December 2023.
-- Total revenue £46.4 (FY £49.5 - 6%)
-- Gross margin of 28.2% (FY23 Q3: 25.6%)
-- Gross profit of £13.1m (FY23 Q3: £12.7m)
Gear4music believes current consensus market expectations for y/e 31/3/24 are revenue of £144.1m, adjusted EBITDA of £9.8m, adjusted profit before tax of £1.3m and pre-IFRS16 net debt of £11.6m.
No current position and unlikely to reinvest unless there is a material improvement in performance. Glad I exited @£6.82 almost 2 years ago. |
Back to a quid on that imo |
Next TU is key here Need to see that before committing further funds |
Chart looking so good. Great recovery play as capex fall will boost margins.
Trading update 18th January. |
Someone is mopping up any stock sold. Great recovery play as lower capex will boost margins.
And the chart looks set for a breakout. |
WOW just look at the chart, so bullish. |
Hopefully a good sign
British retail sales rose far more than expected in November and at their fastest monthly pace since the start of 2023, suggesting the sector “turned a corner” with help from Black Friday discounts ahead of the key Christmas period.
The quantity of goods bought in Great Britain grew 1.3 per cent between October and November, the Office for National Statistics said on Friday, after two months of no growth or contraction. |
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