focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
I wonder if what we are seeing now is shorters starting to close positions - according to data I have there are up to 30 million shares sold short - volume today is high Management and Chairman now seems to focus on return on capital, cash-flow and margin which ultimately drives shares prices, and not growth. I think perhaps growth at any cost was too high on the agenda in 2016/2017. If management walks the talk and starts to deliver what they say shares should easily go back to 250 in my view. GNC still trading very cheap on FY 2018 basis both on P/E (12x if you assume 10% EPS growth) and cash-flow basis
For those interested in the sector Bakkavor now also public, IPO:ed 16/17 November, done quite well since then. Valuation wise seems pretty in-line with GNC, although numbers bit difficult to compare given all refinancing under private ownership. Prospectus interesting read, mentions US FTG/ ready-meals/ salad kits as massive expansion opportunity, should bode well for GNC as well then. Waiting for FY2017 announcement next Tuesday, hopefully share price can start climbing upwards!
see here: https://www.foodmanufacture.co.uk/Article/2017/11/07/Convenience-food-firm-restructure-may-put-jobs-at-risk Must relate to non-food to go business (e.g grocery), so should boost margins long-term and good for long-term investors.
Below is transcript from 1H 2017 earnings - in the light of current valuation pretty interesting for investors taking a long-term view: Between 2016 and pro forma 2018, we're going to go from GBP 1.5 billion of revenue to GBP 3 billion of revenue. We're going to double the size and scale and reach of our business in a little over a year. And the way we think about 2017 is it's the transitional period that facilitates that. And again, if you think about the drivers of that step-up, crudely and in round terms, about 2/3 of that is the acquisition of Peacock and the revenue growth of Peacock. And 1/3 of that, by which I mean GBP 500 million, is the underlying growth of the base business that we have over the course of 2 years with the associated market growth and investment program that we've got rolling out across our business. So it's a very, very significant transformation in terms of what we're trying to achieve in the business. And 2017 is the gateway period for that in terms of how we're running the business.
Sales of Fever-Tree are up 74%even as other high-end tonics and mixers-with-a-twist join the market. http://www.waitrose.com/content/dam/waitrose/Inspiration/About%20Us%20New/Food%20and%20drink%20report%202017/WaitroseFoodAndDrinkReport201718.pdf
I am a shareholder in both companies and follow them closely. My take on your questions: Q1: difficult to know, it is likely, but could also be additional/new business GNC is doing with Tyson. Q2: They never gave explicit comments, GNC management was bullish on the peacock pipeline overall in terms of growth, i guess the only way the price could be justified. In the investor presentation it says "enlarged contract with KraftHeinz from 2017". My guess is that KraftHeinz would offer a lot of potential given 3G ownership and they are all for outsourcing/franchising of business... Q3/Q4: Peacock does Jimmy Dean breakfast sandwiches which is a huge business for Tyson. Jimmy Dean brand is > $ 1 Bn sales, dont know how much of that is breakfast sandwich but as you understand this is big business. Relationship +12years. Tyson is Peacock largest customer. contracts are co-invest. If GNC has lost business from Tyson it would have huge impact => consensus was confirmed in recent RNS and Jacksonville was not part of Peacock acquisition so cannot be Tyson, also because they say profit impact minimal. One thing which do worry me slightly is that Tyson booked $30 million costs for contract cancellation in their recent investor update. I would hope that is cancellation of Advance Pierre meat supplier contracts and not Jimmy Dean. I remain bullish simply because current valuation prices in more bad news. I think a fair valuation would be say 15x 2018 forecast which gets you to at least 250. Judgement day is approaching end of November :)
For those interested in industry dynamics: Bakkavor (https://www.bakkavor.com/) annoucned intention to float recently. Although not focused on sandwiches, they are and will be a direct peer for GNC once listed. Bakkavor more diversified (but also less focused), some exposure to China. Margins are similar. Bakkavor revenues pretty similar to GNC pre peacock acquisition. Will be interesting to see at what valuation Bakkavor can float. Having worked for one of the bulge bracket banks 9 years I am pretty sure they are not aiming for forward P/E of 10-12x P/E (GNC 2018 P/E range in my view)......
yes....BlackRock`s role / strategy in this is very unclear to me. Anyway I am looking forward to the FY2017 announcement, would be nice if management can be more specific on margin and sales targets so SP can start upward climb. At current SP level GNC is a deep value play.
Can anyone help me understand latest RNS. Blackrock now done with stake reduction, or have the lent some shares, or has stake increased due to scrip dividend, but why take scrip div if you are reducing stake ?
My 2 cents: If you sell now you would sell at record low valuation. Current valuation only makes sense if a) more negative news to come or b) company does not grow sales and profits at all. A) is the unknown. Regarding B): GNC guided for £3bn sales pro-forma 2018 as part of 1H 2017 earnings call. Assume some margin recovery due to high-start up costs/investment phase over the past years, perhaps they do 17-18 EPS 2018 gives you ridiculously low forward P/E, again implying no growth. More importantly, they will generate > £150-200m cash from operations pre capex vs. market cap of £1.300 => valuation does not make sense. Even if you take a hair-cut to these ballpark forecasts there is wide margin of safety. At this level stock is interesting bet, I believe more bad news are already priced in. If GNC can somehow deliver 2017 within consensus and upbeat outlook for 2018 I would be surprised not to see a massive rally. Blackrock reducing stake massively which given small size of GNC market cap unfortunately has high impact, esp. if sentiment bad already.
Sorry for basic question but do we have to wait until 28 November until next results announcement or does GNC usually issue a preliminary announcement ? (like SSP plc did the other day). This baby now trades at 8-9x estimated operating cash flow for fiscal year 2017, crazy valuation / does not make any sense, I hope this is pure manipulation and not that market is aware of bad news not out yet. I really hope the relationship with Tyson is intact. Tyson announced `strategic update� the other day with raised guidance and cost-cutting. As part of the cost-cutting they included 20-30 million dollar for `contract cancellations`. Given current valuation its annoying that management does not announce share buyback, sign that they do not fully understand concept of shareholder value in my view.
I agree with these comments, in a few years time (if company still standalone by then...) I am pretty sure we will all be looking back and dream about �22-25 entry point :). I live in Sweden and FEVR is sold off trade in supermarkets here as well now, I keep an eye on the shelfs just out of curiosity and they are pretty empty each time I look. I also travel to Germany on a regular basis and same story there. Sweden clearly small country, but it still shows that FEVR has the potential to become a truly global brand...
If SP stays at 200 levels for long I would be surprised not to see a private equity buyout. Difficult for them to make the numbers work when GNC traded 15-20x P/E, but at current levels there is space for them to offer decent premium and still retain upside of growing the £3 Bn sales entity and improving profit margin. Also, Peacock was owned by PE before selling out to GNC. One thing I do not understand is why GNC does not launch aggressive share buyback, perhaps lend another turn of EBITDA, say £150m. Would take off more than 10% of current market cap. Would create massive shareholder value long term.
maybe i am being thick here / I am misunderstanding you - but I dont think the Jacksonville plant was part of Peacock operations/deal, if you look at the transaction announcement presentation p 20 you see it marked as greencore plant...
According to the presentation at the time of announcement it says Peacock had +12 y relationship with Tyson for breakfast sandwiches. So if GNC pre Peacock (what i call GNC US legacy business) had any business with Tyson I dont think it would have been breakfast sandwiches as I dont think it would make sense from Tyson business perspective to spread outsourcing over several manufacturers btw, Jimmy Dean is a $1 Bn brand for Tyson (am a shareholder so follow them as well), now all of that is not breakfast sandwiches but a fair amount. I dont think Jacksonville issue relates to Tyson as I would think any loss of Tyson business would have a serious impact on profits and not "minmal" as the RNS says But I guess we will find out when FY2017 results are out...
I thought the Jimmy Dean Frozen Breakfast (Tyson brand) came with the Peacock business. I dont think Greencore US legacy business was doing business with Tyson. To summarise I think GNC legacy US business is mostly Sbucks, 7-eleven etc and Peacock has all the CPG customers
I agree that brokers not that insightful but think you are being overly negative here - are you short the stock :) ? I am not sure about your comment that fundamentals are weak. They have build a great UK Food to go business with good margins, cash-flows and ROIC. Non-food to go UK arguably not great business but they seem to at least start closing out some of it (evercreech i think). They organic expansion into US clearly did not work, but peacock seems to be a good business, again, good fundamentals so not sure about your comment here. If pipeline is as strong as they say price paid could be OK, but they should have financed more with debt and much smaller rights issue in my view. I agree that markets seems to need convincing but current valuation is very low - current mcap 1400 - 2016 cash from operations c. 110m + add peacock 40/50m = 150m cash from ops, c. 10x multiple, thats low - if £3.0 Bn revenue target 2018 and margin improves next year this stock is massively undervalued, that much is clear. - But probably rocky ride until FY 2017 results and they need to deliver. I am invested so sure hope they will.
Management should buy shares + launch share buyback to squeeze the short sellers
also, Jacksonville site mentioned in RNS was part of GNC pre-peacock, so should not imply any issue with Tyson frozen breakfast products one would hope. Hopefully just some footprint optimisation post deal
Unless there is a general multiple de-rating ongoing on this stock, the current valuation seems disconnected from reality. Taking a step back, CEO said during 1H 2017 earnings call revenues will be £3 Bn end of 2018. Margins should recover next year given high start up costs in 2017. Assume 6-7% profit margin in 2018 GNC should churn out 200m cash from operations pre-capex. Current market cap 1.340. Buying at this level should be a no-brainer unless there are "unknown" suprises still to come I think GNC should launch a share buyback, debt capacity is limited post peacock but there would be some headroom. Would give market confidence and create massive value for shareholders long term. Worked very well for Paysafe post the short-sellers report earlier this year