Studio Retail Group

LN: STU

£165.1m market cap

191p last close

Studio Retail Group is a multi-channel retailer operating across the business-to-consumer and business-to-business market places. It is a market-leading online value retailer and educational resource supplier in the UK.

Investment summary

Studio Retail Group (STU) is reaping the rewards of its digital-first and value-led strategy. FY19 group sales grew 5.7% and underlying PBT increased 17.7% (like-for like, taking into account the adoption of IFRS 9 and IFRS 15). This was predominantly driven by Studio’s strong performance, with product revenue growth of 7.8% and a 170bp improvement in the product gross margin. Our FY20 underlying PBT forecast is broadly unchanged following our earnings upgrade in May. Despite a recent rebound, the shares remain significantly undervalued for a predominantly online retailer with a strong balance sheet and significant growth opportunities. We value STU at 423p.

Y/E Mar
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 479.6 46.6 26.8 25.9 7.4 14.4
2019A 506.8 50.9 28.8 26.5 7.2 7.4
2020E 535.5 53.6 30.0 28.9 6.6 4.8
2021E 557.6 56.3 31.7 30.5 6.3 4.3
Industry outlook

In the three months to July 2019, UK retail sales (ex fuel) grew 3.0% y-o-y by volume and 3.3% by value. However, online sales rose 9.8% in the same three months y-o-y, creating additional tailwinds for Studio which trades at c 75% online. The squeeze on schools’ budgets continues to restrain the education supply sector.

Last updated on 20/11/2019
Sector
Consumer
Share price graph
Balance sheet
Forecast net debt (£m) 236.6
Forecast gearing ratio (%) 351
Price performance
%
1m
3m
12m
Actual (3.2) (2.8) (6.4)
Relative* (4.6) (5.5) (11.3)
52-week high/low 260.0p/154.0p
*% relative to local index
Key management
Ian Burke Chairman
Philip Maudsley CEO
Stuart Caldwell CFO

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