In a sector where traditional offers are struggling, the market awards high valuations to operators that have demonstrated the creation and development of new markets. QUIZ, with its expanding presence in the 16-35 year-old fast fashion market, and only nine months after IPO, is still in the process of realising that promise. The latest indications suggest that it is succeeding, and argue for a re-rating.
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QUIZ |
Fashion forward
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1 May 2018 |
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In a sector where traditional offers are struggling, the market awards high valuations to operators that have demonstrated the creation and development of new markets. QUIZ, with its expanding presence in the 16-35 year-old fast fashion market, and only nine months after IPO, is still in the process of realising that promise. The latest indications suggest that it is succeeding, and argue for a re-rating.
Pre-close: On course for FY18 PBT growth of 21%
QUIZ confirms that FY revenue grew by 30%, or 36% underlying, to £116.4m in line with expectations. Online sales, 26% of the total, grew by 158% driven by the company’s own websites and growing presence in third-party websites. UK stores and concessions (56% of sales) grew 12%, driven about equally by strong like-for-likes and new openings. International stores (18%) grew by an underlying 32%, with openings in Spain and Ireland, and franchised stores across established markets. Gross margins are as expected and QUIZ is investing in growth across its IT, online, marketing, distribution, buying and merchandising functions.
Growth being realised across chosen channels
The QUIZ brand has traded since 1993 under CEO Tarak Ramzan. It has a niche, differentiated proposition, focused on value fast fashion and occasion wear. Its target market is 16 to 35 year-old fashion conscious (‘fashion forward’) customers who like to dress up and stand out from the crowd. It has 71 UK stores and a presence on the websites of Next, Zalando and Dorothy Perkins. At Debenhams and House of Fraser it also has store concessions, part of a total of 147.
Forecasts look realistic given independent appeal
With strong take-up for its fast fashion offer, QUIZ is progressing across its omni-channel market strategy. Its experienced management team is investing proportionately in the structure to sustain and support that growth. Revenue CAGR of 30% over FY19-20e looks well within reach and, while matching the structure to an expanding top-line is an issue for any small company, PBT CAGR at 25% allows for that investment in structure.
Valuation: Mid-range with re-rating potential
QUIZ’s consensus FY18e P/E of 25.1x is mid-range between more traditional retailers like Next (12.7x) and high-growth online operators such as Boohoo (49.7x). If QUIZ validates its high growth forecasts, a re-rating should result.
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Consensus estimates
Source: QUIZ, Bloomberg. Note: **Excludes exceptional costs and share-based payments. |
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: Investment Companies
Hansa Trust (HAN/HANA) has undergone a transformation in the past four years and now offers investors a blend of core regional equity funds; thematic exposure to areas including technology; diversifying assets such as hedge funds; direct holdings in global equities; and a longstanding strategic stake in Brazilian maritime services firm Wilson Sons (WSON). The aim is to preserve and grow capital, while giving investors access to assets they would be unable or unlikely to access individually. Possibly as a result of the c 30% holding in Ocean Wilsons Holdings (the majority owner of WSON) and the dual share classes with the majority of voting shares owned by the Salomon family, Hansa Trust has tended to trade at a wide discount to NAV. However, manager Alec Letchfield notes that in an environment of extended equity market valuations, this could be viewed as a margin of safety compared with funds that trade close to or above NAV.