The Gym Share Discussion Threads

[tradekeeper] 27/1/2019 09:31

Hi Pugugly, do you have any examples of these red flags in regards to cannibalisation

[thomshrike] 23/1/2019 16:36

wow, very bullish trading pattern today.

[thomshrike] 23/1/2019 11:29

Hi pugugly, pls keep in mind that p/e is misleading on this one, due to the maturity curve of gym vintages (i.e. initial costs of new gyms, time lag until gym maturity, depreciation timing, etc).
That's why in this case FCF yield (ex-expansion capex) is a more reliable measure of shareholder return. You get the feeling of how much cash the company would be freeing for investors in case they just maintained their existing estate.

[pugugly] 23/1/2019 11:19

thom - Thanks - Interesting re Basic-Fit - Up 18% over 1 year but down 8% over last 6 months - Need to carry on with DD. but forward p/e still challenging based on recent analysts projections My calculations so no guarantee I have done them correctly
PER GYM NUMIS
Share price £2.060 eps p/e
eps current 2017 £0.074 27.84
eps forecast 2018 £0.081 25.43
eps forecast 2019 £0.116 17.76




PER GYM RBC
Share price £2.060
eps current 2017 £0.074 27.84
eps forecast 2018 £0.082 25.12
eps forecast 2019 £0.108 19.07
eps forecast 2020 £0.140 14.71

e&oe.

[thomshrike] 23/1/2019 09:23

With regard to saturation, numbers show that the answer is No.
Low-cost gym penetration is still low (c. 10% of the gyms, 20% of the members) and GYM is steadily gaining market share within the low-cost segment and also consolidating the market.
GYM's competitive advantages are structural - in fact they are self-reinforcing, as scale brings better locations, better terms with landlords and equipment suppliers, dilution of central fixed costs and the benefits of dual memberships. Engaging into national ad campaigns merely reflect the fact that the company has achieved a size that justifies it (similar to Basic-Fit in France).
For GYM, returns of different gym vintages continue to be consistent, whilst new openings continue to generate consistent results too. New initiatives like LiveIt will increase yields and potentially returns going forward. Note that revenue per member increased by 3.3% in 2018.
Again, no signs of market saturation, actually the opposite.
If you strip out expansion capex, the stock is now trading at 12% FCF yield. That looks very attractive (i) as a standalone, (ii) relative to Basic-Fit, and (iii) relative to the market as a safe-haven in case of economic slowdown.

[pugugly] 23/1/2019 08:28

Could it be that the market is nearing saturation and with new gyms being opened all they are doing is cannibalising others footfall?
If so - and there are a number of red flags out which suggest this may be the case then forward p/e still far too high (imo)

[rathean] 22/1/2019 14:46

They have launched marketing campaigns across social media and TV, as have PureGym. Mostly interchangeable so as always it comes down to location, who has the most conveniently located gym because most really don't care about the name of it.My earlier comments stand, solid results signalling continued growth is a market that will see repeated rounds of consolidation imo dyor ofc.

[dtaliadoros] 22/1/2019 14:06

Quepasse. I disagree with you in advertising and marketing strategy. Sponsorship of sports events would not be the most efficient form of advertising. Gym is made up of many local markets. Advertising is best targeted in the location where gyms are sited. There is no point raising brand awareness in location that has no access to a Gym gym. Unlike easyJet where passengers will travel to consume the product....a person will not travel to use a gym.

[ultimatewarrior] 16/1/2019 12:23

Exactly - though they could fix machines quicker

[turbocharge] 16/1/2019 12:21

QuePassa, the investor dial-in conference can be found here:

[rathean] 16/1/2019 12:12

Looking at longer term trends and circa 235 looks like an interesting target. I agree RE longer term hold beyond all the political noise, but imo the share price could test the above price with a little encouragement imo dyor ofc.

[turbocharge] 16/1/2019 11:22

I reckon GYM is a good defensive stock to hold in the current jittery times. If people are cutting down and spending less, forgoing their low cost gym membership will be very low on their list. If anything, those paying more at other gyms will be cancelling and joining the Gym Group. Just my opinion.

[turbocharge] 15/1/2019 13:57

Buys have been greater than sells in the last 2-3 days, perhaps there's a seller out there causing the share price to stay depressed...?

[thomshrike] 15/1/2019 13:30

-The added cost with paying PT’s VAT is a structural negative, but the present value of the related annuity should not be impact more than c. -7/8m GBP on GYM’s equity value.
-The timing issues should impact the value of the company by max. 2m GBP.
-So both of the negatives should have an impact of no more than 4% of market cap.
-The pricing issue was quite explained in the conference call and the yield increase (+3.3% yoy, above market expectations) debunks the argument written in the recent BarCap note.
-The share price declined c. 40% in a couple of months, when maybe -5% would be fair. The share price is back close to IPO levels, when now the company is c. 3x larger, with better profitability and plenty of room to grow. Extremely unfair and prone for a rebound IMO.

[thomshrike] 15/1/2019 13:27

Also important to highlight: 2019 FCF, stripping out expansion capex, is expected to amount to 35m. That’s 12% FCF yield.

[dsct] 15/1/2019 11:53

Agreed with the general consensus here, that the KPIs etc. look good, as summarised by QuePassa (#239).

I've done some quick calcs, based upon the figures in today's TU.

For clarification, I'll show 2017 figures first:
Revenue £91,377m
Op Profit £9,942m
Op Margin 10.88%

- Exceptional items £1,664m
- Depreciation £14,408m
- Amortisation £1,175m
- Employee incentive costs £774
= EBITDA £27,963m

Attrib Profit £7,171m

My Estimates for 2018:
Revenue £123,900m (From TU)
Op Profit £10,305m
Op Margin 8.32%

- Exceptional items £2,590m
- Depreciation £20,117m
- Amortisation £2,488m
- Employee incentive costs £1,500 (stated in last A/R)
= EBITDA £37,000m

Attrib Profit £6,829m

I've calculated Admin expenses at 2xH1 (£51,870m) plus a bit to give £112,356m, and done similar with the EBITDA costs.

I still need to check these, so if anyone has comments/corrections, please feel free to voice them.

It appears the business model is working/will work, but I hope they ensure the existing estate is up-to-speed before expanding too rapidly. They should also then be able to start reducing the debt, which although not a problem, would be another bonus-headline, in addition to more of the revenue growth dropping to the bottom line.

I'd like to re-purchase the 25% of my holding I sold in December, but not sure at what price - perhaps sub 200p ? or maybe wait until the prelims on 19th March ?

[turbocharge] 15/1/2019 09:25

'We are well placed to continue to generate high levels of growth whilst maintaining strong returns on capital. We are confident that in 2019 we will continue to develop and build the business to deliver another year of profitable growth for shareholders,' the company said.

[turbocharge] 15/1/2019 09:14

Thanks for the write up QuePassa, must admit haven't had a chance to look properly. As far as I'm concerned, I will be holding these for the longer term.