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Beaufort Securities Breakfast Alert Boomerang Systems, Restaurant Group and Audioboom

Beaufort Securities Breakfast Alert Boomerang Systems, Restaurant Group and Audioboom

The Markets

Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 91.0 points down at 7:00 am.

New York: Wall Street declined amid a mixed jobs report, indicating better unemployment rate but declining wages. Events in France following the Charlie Hebdo massacre added to concerns. The S&P 500 shed 0.8% in Friday’s trading session.

Asia: Markets are trading positive despite an unexpected drop in the US hourly earnings and uncertainty over the massacre in France. The Nikkei rose 0.2% at close. The Hang Seng was trading 0.3% up at 7:00 am, mainly led by heavy gains in Hutchison Whampoa and Cheung Kong shares after a restructuring announcement by Li Ka-shing.

Continental Europe: Markets reported losses, as uncertainty loomed large due to the satirical magazine carnage in France. Poor industrial output in Germany and France weighed on the sentiment. ECB’s new individual targets pressurised Europe’s banks to raise more capital, with Santander responding by selling shares worth €7.5bn. France’s CAC 40 and Germany’s DAX contracted 1.9% each.

Crude Oil: On Friday, prices of Brent and WTI crude oil declined 1.7% and 0.9%, respectively. The spread between the two varieties stood at US$1.8 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.46% higher on Friday at 703.45. To read our latest research click here.

Today’s news

UK’s Q4 GDP growth eases to 0.6%: NIESR 

National Institute of Economic and Social Research (NIESR) estimated the UK’s GDP growth slowed to 0.6% from October-December, following a reading of 0.7% for the three months to September. As per the release, the economy grew 2.6% in 2014 compared with 1.7% in 2013.

Company News

AudioBoom (LON:BOOM) – Speculative Buy

On Friday, AudioBoom announced a partnership with US-based Nobex Radio that possesses an award winning app for live radio content. The partnership ensures access to 20,000 radio stations in the US and 75 countries around the world. The radio stations would be able to use AudioBoom’s full content and technical functionality through the Nobex app. They would also be able to share their content with the audience via AudioBoom’s on-demand functionality. The revenue model requires the company to pay a referral fee to Nobex for every radio station that opens an AudioBoom account. The company would receive all the revenue, ad sale costs and partner payments till the referral fee is recovered. Going forward, the company would receive a fixed revenue percentage from Nobex for the on-demand audio usage.

Our view: AudioBoom has announced another pro-business tie-up in as many days. The company seems to be firing on all cylinders to significantly increase its customer outreach and become a global player. Big and important partners have been sought across different geographies. The recent tie-ups with Cloud Africa and Audible, a subsidiary of Amazon, are testimony to that. Additionally, the company has partnered with various media houses to broadcast their content and improve the app platform that has already found favour among the users. Thus in view of the above, we remain confident of the capabilities of the company’s innovative technology that has helped it win so many partners. We retain our Speculative Buy rating on the stock.

Economic News

Restaurant Group (LON:RTN) – Sell

Restaurant Group provided a trading update for the 52 weeks ending 28th December 2014. Revenues grew 9.6%, whereas on a like-for-like basis (LFL) sales improved by 2.8%. During the two-week Christmas holiday period, the LFL sales grew 5%. Additionally, the company opened 40 new restaurants during the year, compared to 35 in 2013. Restaurant Group remains confident of its growth outlook for 2015 and expects material growth in both earnings and cash flows. Moreover, plans are underway to open 42 to 50 new restaurants during 2015. The company expects to announce the full year results by the end of February 2015.

Our view: Restaurant Group weathered the economic downturn quite well and has shown steady top-line growth while improving the margins. It is among the few stocks that have consistently outperformed the FTSE 100 benchmark over the past few years. In addition, the company’s bright outlook and extensive plans for more outlets is likely to fuel future growth. However, the company’s price to earnings at 20.2x seem to be on a higher side compared to the industry average at 14.9x, suggesting that the shares may be fairly valued already. Moreover, of-late, a distinct behavioural change has been observed among the UK consumers who have become more value-cost conscious despite rise in disposable income. Thus in view of the mixed picture, we would like to wait in order to assess the impact of these changes on company’s future prospects. We reiterate our Sell rating on the stock.

Important Risk Warnings and Disclaimers 

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