Three to buy
Ricardo
Gym Group
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(Shares) Retail closures have “increased the availability of high-quality sites” that were previously beyond low-cost fitness firm Gym Group’s budget. It now plans to open new gyms in Oxford, York and Cambridge. A study by consultancy firm PwC , meanwhile, estimates there is “headroom for low-cost gyms to increase their market shares”. There is plenty of pent-up demand: 87% of gym members are set to resume their memberships, and 27% of those who were not members are likely to join. 247p
Greggs
(Investors’ Chronicle) The bakery chain is hitting the ground running as lockdown loosens. It will open 100 new shops this year on top of its existing outlets. “Investors were not worried” by the firm’s 2020 pre-tax loss, its first since listing in the 1980s, and the shares have doubled over the last six months. New outlets “show the company is confident those coming out of lockdown haven’t lost their fondness for sausage rolls”. 2,241p
Three to sell
Purplebricks
(Investors’ Chronicle) Housing transactions have rocketed since the introduction of the stamp-duty holiday on properties valued up to £500,000, and estate agencies have benefited from the boom. Shares in Purplebricks have more than doubled as a result. The firm has left the US and Australia, which has cut marketing costs by nearly a quarter and produced the first pre-tax profit since it floated in 2015. But “the consensus forecast for earnings per share stands at 1.11p”, so at 105p the shares are valued at a “lofty price/earnings multiple of 94”. The housing market boom is also fickle and unpredictable. Sell. 105p
Dr. Martens
(The Sunday Times) Dr. Martens listed in January and is now “on the cusp” of joining the FTSE 100. Underlying earnings “leapt” from £85m to £185m in the year to March 2020 thanks to the group’s focus on selling directly to consumers through 130 stores and the website. A third of the 11 million pairs of shoes it sold last year were sold through the firm’s own channels, and the idea now “is to lift this to 60%”. But brands that “focus on short-term profits tend to store up long-term problems”. Avoid. 494p
Française des Jeux
(The Daily Telegraph) Shares in French national lottery operator Française des Jeux have gained 76.3% since January 2020 owing to US gaming companies’ enthusiasm for “takeovers of European rivals”. Française des Jeux is “safe from a takeover” thanks to the state’s 22% stake, but the firm could now “decide to make some acquisitions”, although it has no experience in the costly business of takeovers. That possibility, along with a full price, makes it a sell. €41.45
...and the rest
Investors’ Chronicle
High-street retailer JD Sports has seen “robust trading” despite the “unprecedented” challenge of the pandemic. It is also looking into “significant” expansion in the US, a growing market boasting “exceptional” trading. Buy (927p). Revolution Bars reports that more than 10,000 customers have booked in from 17 May, when it should be able to serve patrons indoors. But this “does not automatically translate into cash flow” and net debt is worth three times the firm’s market value. Sell (31p).
The Mail on Sunday
Shares in carpet maker Victoria have reached an all-time peak of £8.80 thanks to record turnover for the year to April 2021, driven by homeowners that “chose to spruce up their flooring” in lockdown. “This is an opportune moment to bank some profit”, but don’t sell out completely (880p).
Shares
Domino’s Pizza was boosted by the boom in food delivery throughout lockdown, but “that horse has run its race”. Pent-up demand for visiting restaurants will mean fewer people order in, and as the weather improves more people will head out. Sell (366p). China’s e-commerce giant Alibaba was recently hit by a $2.8bn antitrust fine by Beijing. But this represents “barely 10% of the company’s annual free cashflow”. Its “underlying growth story” is unchanged and it is on a 20% discount to peers. Buy ($256).
The Daily Telegraph
Covid-19 has “destroyed” cruise firm Carnival’s revenues and share price, but the firm has raised “plenty of money from investors to ensure it can survive the crisis”. It is a “good way to play a recovery from the pandemic”. Hold (1,670p).
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