Café and bar chain Loungers PLC (LON:LGRS) could potentially triple in size to more than 500 outlets according to analysts at Liberum Capital, who initiated the stock with a ‘buy’ rating and 275p target price on Monday.
In a note to clients, the broker said the AIM-listed firm’s low capital and operating expenditure would drive “high returns and fast paybacks” for investors alongside vast headroom for expansion backed by an “unrivalled” track record of like-for-likes, unit growth and robust margins.
READ: Loungers raises £83mln ahead of AIM IPO
Liberum's analysts predicted that the group could expand its existing estate of around 122 Lounges and 24 Cosy Clubs to as many as 400 and 100 locations respectively, which in turn could more than quadruple its underlying earnings (EBITDA) to over £90mln in a decade compared to £20.3mln in the 2019 financial year provided its current pace of 25 openings a year was maintained.
“Loungers’ all-day café-bar concept has a hyper-local strategy offering hospitality, community, atmosphere, and value for money. It appeals to a broad demographic across an array of locations, perpetually evolving to stay relevant and ahead of the competition”, they added.
Founded in 2002, Loungers floated on AIM on 29 April after raising £83mln in an initial public offering (IPO) which priced the shares at 200p a pop.
Sine then the shares have performed relatively strongly and were up 10.3% on that IPO price at 220.5p in late-morning trading on Monday.