Brighton Pier Group (BPG) looks to be rather more than a clear play on the expected UK staycation boom, attractive as that is. With a focus on popular low-ticket leisure, driven by the group’s fabled eponymous key asset, entrepreneurial management sees longer-term growth opportunities as a consolidator accelerated by fallout from the pandemic. For now, it is confident that buoyancy in the Pier and Golf after spring 2020 lockdown (sales in Q3 almost at 2019 levels) can be repeated on imminent phased reopening, while business interruption insurance payments should continue to buttress results. Finances appear secure with £6m liquidity, further insurance payments aside, and, even after FY20 impairments, low gearing, given asset backing (70% and 47p NAV per share at end-2020).
Brighton Pier Group |
A fun ride
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Travel & leisure |
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9 April 2021 |
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Brighton Pier Group (BPG) looks to be rather more than a clear play on the expected UK staycation boom, attractive as that is. With a focus on popular low-ticket leisure, driven by the group’s fabled eponymous key asset, entrepreneurial management sees longer-term growth opportunities as a consolidator accelerated by fallout from the pandemic. For now, it is confident that buoyancy in the Pier and Golf after spring 2020 lockdown (sales in Q3 almost at 2019 levels) can be repeated on imminent phased reopening, while business interruption insurance payments should continue to buttress results. Finances appear secure with £6m liquidity, further insurance payments aside, and, even after FY20 impairments, low gearing, given asset backing (70% and 47p NAV per share at end-2020).
Pier review
UK seaside piers in the guise of Blackpool’s similarly iconic trio helped fuel the progress in the 1980s of First Leisure into a successful leisure conglomerate. Their strong cash generation funded highly profitable marginal revenue growth from existing sites and expansion by investment and acquisition. For its part Brighton Palace Pier, the UK’s most visited attraction outside London with about five million visitors in 2019 (VisitEngland), has seen revenue rise by 30% over the six years before COVID-19, at a consistent EBITDA margin of 20–25%. It is unsurprising therefore that in 2016 it was acquired by Eclectic Bar Group under Executive Chairman Luke Johnson as a key step in its aim to become a differentiated operator of leisure and entertainment assets. The combined entity (renamed Brighton Pier Group) then moved into indoor minigolf as a growth business with good free cash flow and less seasonality.
Calm waters
In addition to the boost to domestic leisure from uncertainty about foreign holidays in 2021, there is industry consensus ahead of reopening about pent-up demand, evident in buoyant trading after the spring 2020 lockdown and despite subsequent restrictions. Thereafter leisure operators agree there is undeniable opportunity for well-funded businesses with the prospect of increasing availability of prime sites at ever cheaper prices and significant erosion of competition.
Valuation: The time is right
Results for the half to December 2020, showing strength when allowed to trade, suggest BPG is ready to capitalise in both the short and longer term. Current year consensus forecasts look generous, eg H2 revenue is expected to exceed H219 by two-thirds despite closures, but the prospective P/E rating is duly modest at 5x.
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Consensus estimates
Source: Refinitiv. Note: *Pre-IFRS 16. |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: TMT
Allied Minds’ FY20 results confirmed parent cash of US$22.3m, with revenues of US$0.5m (FY19: US$2.7m), mainly from one-off engineering and service contracts. There has been no further material news on portfolio developments, with FY21 funding rounds anticipated for Federated Wireless, BridgeComm, Spin Memory and Spark Insights. Given their short-term need for cash, we have elected to reduce the value of Spin Memory and Spark Insights to zero in our estimated NAV, so any funding news should be a positive catalyst. Allied Minds’ shares trade at a c 46% discount to our FY20 adjusted NAV estimate of 42.5p per share, based on latest funding rounds. We will be interested to hear directly from the portfolio companies at the capital markets day (CMD) on 14 April 2021.