House broker Panmure Gordon boogied on up to the York headquarters of recently listed Gear4Music (LON:G4M) to size up the showroom and distribution centre.
The broker likes the showroom format, with dedicated areas for the instrument and knowledgeable staff, but notes the online retailer has yet to open up the promised London showroom.
The company is still looking for a suitable site – Denmark Street, off Charing Cross Road is the usual locale for music shops – and Panmure Gordon's guess is that the retailer will plump for a central London location.
The York HQ also has a studio in which it films product showcase videos – 111 and counting, so far.
In the meantime, Panmure Gordon believes the retailer is all set to go for the discount bonanza that is Black Friday.
The carrying value of stock heading into the Christmas trading period was £8.02mln, up 61% year-on-year.
The number of stock keeping units, or product lines, had been increased from 27,400 at the end of March to 29,300 at the end of August, due in part to the addition of 11 new brands, including Kawai, TRX and Roli.
Useful though a London showroom would be, an online retailer lives and dies on the robustness of its e-commerce platform, and Panmure Gordon seemed suitably impressed with the multi-lingual multi-currency offering of Gear4Music.
“In the last period it invested £395,000 in the platform, £277,000 H1 YOY [first half year-on-year], £551K total last FY [full year],” the broker reports.
Half-year revenue was up 43% to £12.49mln and Panmure Gordon is predicting that in the year to end-February 2016 it will take in £32.6mln in sales.
Adjusted profit before tax is tipped to come in at around £700,000, giving earnings per share of 2.9p, placing the stock on a projected dividend yield of 50.2 – lumpy, but not unheard of for an Internet company growing its top line at a fast rate.
'Buy' is the house broker's recommendation, with a price target of 180p. Gear4Music shares currently trade at 148.5p.