Leading International Investment Research, Edison Investment Research

Edison Investment Research

Leading International Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

Equity Bottom-Up

Gregg’s Q321 trading statement (to 2 October) indicated improved revenue momentum despite recent supply chain and staffing disruptions and an increase in FY21 profit expectations, although rising inflationary pressures (ingredients, staff and utilities) are expected from Q421. This suggests a more challenging FY22 from a cost perspective. Management set a new ‘ambitious’ five-year target (to the end of FY26) to double revenue to £2.4bn (CAGR of 14–15%) from an equal combination of accelerated space growth (number and average size of stores) to reach at least 3,000 stores and space productivity from both ongoing (delivery and evening day part) and new (enhanced loyalty and marketing) initiatives. Simply put, the ambition is to extend Greggs’ strength from daytime retail to an all-day multichannel. Our forecasts are under review.

Gregg’s Q321 trading statement (to 2 October) indicated improved revenue momentum despite recent supply chain and staffing disruptions and an increase in FY21 profit expectations, although rising inflationary pressures (ingredients, staff and utilities) are expected from Q421. This suggests a more challenging FY22 from a cost perspective. Management set a new ‘ambitious’ five-year target (to the end of FY26) to double revenue to £2.4bn (CAGR of 14–15%) from an equal combination of accelerated space growth (number and average size of stores) to reach at least 3,000 stores and space productivity from both ongoing (delivery and evening day part) and new (enhanced loyalty and marketing) initiatives. Simply put, the ambition is to extend Greggs’ strength from daytime retail to an all-day multichannel. Our forecasts are under review.

Greggs - Medium-term growth ambition quantified

Greggs’ H121 results demonstrate how well management has steered the company through COVID-19, notably the re-instatement of the interim dividend. Management is now firmly focused on delivering on its refreshed long-term growth strategy. We have upgraded our FY21 PBT forecasts by 7% to reflect the resilient trading and cost control. Our forecasts for revenue, PBT and dividends in FY21 are higher than reported in FY19, despite the ongoing disruption to some parts of the estate, highlighting the success of new initiatives that are expected to enhance future growth prospects. On our new forecasts, the P/E multiples for FY21 of 26.8x and FY22 of 24.7x are below recent peak multiples.

Greggs’ H121 results demonstrate how well management has steered the company through COVID-19, notably the re-instatement of the interim dividend. Management is now firmly focused on delivering on its refreshed long-term growth strategy. We have upgraded our FY21 PBT forecasts by 7% to reflect the resilient trading and cost control. Our forecasts for revenue, PBT and dividends in FY21 are higher than reported in FY19, despite the ongoing disruption to some parts of the estate, highlighting the success of new initiatives that are expected to enhance future growth prospects. On our new forecasts, the P/E multiples for FY21 of 26.8x and FY22 of 24.7x are below recent peak multiples.

Greggs’ Q221 trading has surprised on the upside, with positive two-year like-for-like (lfl) sales growth continuing through the end of the period, having previously reported a return to growth earlier than expected. We upgrade our revenue forecasts for FY21, assuming a positive lfl outturn for the rest of the year, versus negative previously, leading to PBT upgrades for FY21 and FY22 of 18%. The strength of the recovery also leads us to increase our dividend forecast for FY21 by more than 150%. The P/E for FY22 of 22.4x is consistent with Greggs’ average trading multiples before COVID-19, reflecting its medium-term growth outlook and shareholder returns, but below prior peak multiples.

Greggs’ Q221 trading has surprised on the upside, with positive two-year like-for-like (lfl) sales growth continuing through the end of the period, having previously reported a return to growth earlier than expected. We upgrade our revenue forecasts for FY21, assuming a positive lfl outturn for the rest of the year, versus negative previously, leading to PBT upgrades for FY21 and FY22 of 18%. The strength of the recovery also leads us to increase our dividend forecast for FY21 by more than 150%. The P/E for FY22 of 22.4x is consistent with Greggs’ average trading multiples before COVID-19, reflecting its medium-term growth outlook and shareholder returns, but below prior peak multiples.

Greggs - Rate of recovery continues to surprise

Gregg’s trading update indicates a strong rebound in trading since the re-opening of non-essential retail in April 2021, with positive like-for-like (LFL) sales growth versus FY19, which is earlier than we had expected. This is significant as it has been achieved despite not operating at full potential (ie reduced SKUs, shorter opening hours and other social distancing measures) and competition has been more limited, though both will normalise in coming months. With strong cost controls, including temporary benefits, the board believes that FY21 profits could be around 2019 levels in the absence of further restrictions. We upgrade our FY21 PBT forecasts by 64%, due to a less pessimistic LFL sales assumption.

Gregg’s trading update indicates a strong rebound in trading since the re-opening of non-essential retail in April 2021, with positive like-for-like (LFL) sales growth versus FY19, which is earlier than we had expected. This is significant as it has been achieved despite not operating at full potential (ie reduced SKUs, shorter opening hours and other social distancing measures) and competition has been more limited, though both will normalise in coming months. With strong cost controls, including temporary benefits, the board believes that FY21 profits could be around 2019 levels in the absence of further restrictions. We upgrade our FY21 PBT forecasts by 64%, due to a less pessimistic LFL sales assumption. 

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/monde-nissin-corp" target="_blank" data-smartkarma-citation="entities:32188:1" rel="noopener">Monde Nissin Corp (0191881D PM)</a> is a leading food manufacturer in the Philippines with flagship brands such as Lucky Me! for instant noodles and Quorn for meat alternative products. Monde Nissin ranked first in retail sales value in the Philippines with its instant noodles, biscuits, oyster sauce and yoghurt drinks in 2020, according to Nielsen. Monde Nissin will launch pre-marketing for an IPO to raise up to PHP63 billion ($1.3 billion) in April, according to press reports. <div class="content-highlight">Monde Nissin is a play on the growing demand for consumer staples in the Philippines and Thailand and the healthy food category on a global scale. Monde Nissin’s financial track record shows it has been able to combine modest top-line growth with improving margins and cash generation. Overall, we believe that Monde Nissin’s fundamentals are attractive.</div>

Monde Nissin Corp (0191881D PM) is a leading food manufacturer in the Philippines with flagship brands such as Lucky Me! for instant noodles and Quorn for meat alternative products. Monde Nissin ranked first in retail sales value in the Philippines with its instant noodles, biscuits, oyster sauce and yoghurt drinks in 2020, according to Nielsen. Monde Nissin will launch pre-marketing for an IPO to raise up to PHP63 billion ($1.3 billion) in April, according to press reports. Monde Nissin is a play on the growing demand for consumer staples in the Philippines and Thailand and the healthy food category on a global scale. Monde Nissin’s financial track record shows it has been able to combine modest top-line growth with improving margins and cash generation. Overall, we believe that Monde Nissin’s fundamentals are attractive.

Monde Nissin IPO Initiation: Instant Karma

United Kingdom

Greggs plc retails sandwiches, savories, and other bakery-related products. The Company focuses on takeaway food and catering.

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Greggs PLC (GRG LN)

Greggs - Medium-term growth ambition quantified

Gregg’s Q321 trading statement (to 2 October) indicated improved revenue momentum despite recent supply chain and staffing disruptions and an...

Edison Investment Research

Greggs - Let’s talk about growth…

Greggs’ H121 results demonstrate how well management has steered the company through COVID-19, notably the re-instatement of the interim dividend....

Edison Investment Research

Greggs - Rate of recovery continues to surprise

Greggs’ Q221 trading has surprised on the upside, with positive two-year like-for-like (lfl) sales growth continuing through the end of the period,...

Edison Investment Research

Greggs - Recovering better than expected

Gregg’s trading update indicates a strong rebound in trading since the re-opening of non-essential retail in April 2021, with positive...

Edison Investment Research

Monde Nissin IPO Initiation: Instant Karma

Monde Nissin will launch pre-marketing for an IPO to raise up to PHP63 billion ($1.3 billion) in April, according to press reports. Overall, we...

Arun George

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