Loungers PLC (AIM:LGRS), the owner of Cosy Club and Lounge, could be undervalued, argue analysts, with the hospitality group expected to start to enjoy some tailwinds as it continues its expansion drive.
Boasting a 7.7% jump in like-for-like sales in the first half of the financial year, Loungers said revenues were a fifth greater than pre-pandemic figures, totalling £149.6 million in the period, a trading update revealed today.
Noting inflationary pressures were beginning to diminish “in line with expectations”, the AIM-listed group could also be set to benefit from the “continued softening of landlord demands” as highlighted by rivals Tortilla Mexican Grill.
Loungers celebrated opening 200 of its namesake cafes last month and with 34 new openings scheduled for this year, the company is hoping to take its total estate to 255 sites.
Since listing back in 2019, shares in Loungers have remained relatively unchanged, with the share price having fallen 5.3% in the last 12 months but up 6.8% in the year to date.
Analyst Bradley Hughes at Shore Capital suggested if the market does not respond, a bid could be on the cards.
He believes the hospitality firm has made “material progress” since then and reckons “other pools of capital will continue to take advantage of record low valuations in the sector”.
Additionally, analysts at Stifel also fancy the stock, believing the “company’s resilience and growth prospects are underappreciated by the market”, and therefore rate the stock a ‘buy’, targeting a 310p share price.
Pointing out that the expansion drive is self-funding, Stifel analysts are also impressed by how Loungers is appealing to a broad demographic of customers by providing all-day trading and setting up in neighbourhood locations.
Shares in Loungers are up 2.5% on Friday, having opened at 190p.