Northland is the fishing tackle retailer's nominated adviser and house broker, so it knows the company well and is not likely to be prone to “fisherman's exaggeration”.
With just over a month of the year left, Northland has upped its sales forecast to £4.0mln from £3.7mln.
The broker expects the additional sales revenue will be invested into sales and marketing to grow the online business, where higher margins can be achieved. As a result, it sticks with its forecast of adjusted underlying earnings (EBITDA) of £345,000. Earnings per share (EPS) for the current year are tipped to be 1.2p, putting the retailer on a price/earnings ratio of around 13.9.
For next year, the revenue forecast goes up from £3.4mln to £5.0mln and the EBITDA estimate from £0.5mln to £0.6mln, as the broker factors in the new Birmingham outlet, which is scheduled to open in March.
The 2016 EPS forecast rises to 1.8p from 1.5p, giving a very cheap projected earnings multiple of around 9.2.
“Positive update from Fishing Republic this morning where the business is clearly seeing the benefits of a listing and where sales in the first four months of the 2H15 to October 2015 showed strong growth,” Northland's Michael Campbell said.
“The new Birmingham store is in line with management’s strategy to grow the business through a combination of organic growth and via acquisition,” Campbell added, as he reiterated his 'buy' recommendation and upped his price target to 31p from 28p.
The shares were trading at 17.05p at 2.00pm, up 0.05p on the day.