logo-loader

Cheers! City broker sees value for money in Revolution Bars

Published: 15:15 16 Feb 2017 GMT

revolution bar
The analyst has the stock as a 'buy'

Shares in Revolution Bars Group PLC (LON:RBG) were firmer on Thursday after City broker Peel Hunt released a bullish initiation note on the premium bars operator.

The broker thinks the stock is under-priced, especially considering that it has some of the best metrics in its field.

“Revolution Bars Group has built a track record for consistently generating like-for-like sales, average profit growth and cash returns that are amongst the highest in the sector,” said Peel Hunt analyst Ivor Jones.

Jones thinks the company’s low valuation is due in part to the recent departure of its chief financial officer, Chris Chambers, who resigned for family reasons, while it also thinks exaggerated concerns regarding the bar market weigh it down.

“In our view, these concerns overstate Revolution’s risk profile. The company is not heavily exposed to the supply-side risks that restaurants face; nor does it share nightclubs’ dependence on door fees,” Jones added.

The fact that the Manchester-based group – which runs 66 bars up- and down the country – also has no debt or pension deficit is another point that appeals to Jones.

“From this basis, we believe the company offers attractive upside through growth and a potential re-rating, before considering upside from accelerating expansion.”

Similarly, the group’s performance over the past decade or so has also impressed the analyst.

“Since 2004, the group has grown its average sales by 74% and average outlet EBITDA [underlying earnings] by 67%, whilst many other operators have contracted.

“In 2016, the company generated 14% self-financed earnings growth as a result of five new openings, 2.3% like-for-like sales growth and 30bps [basis points] EBIT [underlying earnings] margin growth.”

Jones added that he expects these trends to continue.

On top of all that, the strength of the brand should also appeal to investors. Jones highlights the interaction Revolution has on social media with its customers; it has 800,000 likes on Facebook which works out at 12,800 per outlet.

“The company is [also] using email and SMS [text messages] to 1.2mln contacts to encourage use of its website (up 25% in 2016) in order to boost pre-booked revenue (up 10% in 2016), income visibility and upselling.”

Accesso's landmark deal with SEVEN marks strategic growth in the Saudi Market

Accesso Technology Group PLC (AIM:ACSO, OTC:LOQPF) chief executive Steve Brown joins Proactive's Stephen Gunnion with details of a significant partnership with Saudi Entertainment Ventures (SEVEN). Brown noted the collaboration highlights accesso's strategy to grow its global footprint,...

18 minutes ago