As any experienced market watcher will tell you, shares that are up (down) on a big market down (up) day are particularly striking and should be appropriately noted. Naturally, it can be because of on-the-day newsflow but sometimes there is something a bit deeper to interpret…
Mitchells & Butlers (MAB) may count itself in the lucky timing camp. Its update was not extraordinary but showed progress in all key metrics, especially in relative performance against peers and in the reduction of net debt levels. Neither aspect is flawless - with easy comps playing a role in the former and pushing below x4 net debt to ebitda for the latter - but they are certainly better and correctly the share picked up some positive support in the 240s range (again). A warm summer is probably the ideal for the company for the next few months, but - in my view - if you do see this one in the 240s again then think about it as a tuck away. The better pub businesses are working out how to offset cost and related issues – and are now talking about falling supply/capacity in the restaurant-facing space (thanks Jamie!).
Next up is Hotel Chocolat (HOTC), whose products I like but as a share I have resisted to desire or need to make a 'passion investment'. The metrics are not value investor-oriented like a pub company might be but I do note it is continuing to perform as a business in terms of outlets, revenue and profitability. The company is having a capital markets day from which - when I can get access to it - I will enjoy pacing through the slide deck and comments. However, what may have helped nibble the shares slightly up is the assertion that the (no doubt) very normal style presentation agenda will culminate in a tasting session of various products. That's almost good enough to go back to being an institutional fund manager and/or analyst for a day! More on this one another time but the announcement did pique my interest.
Finally to the share I really wanted to talk about, which is the brick company Ibstock (IBST). Its AGM statement touched positively on pricing and ongoing corporate change (boosted capacity scope due to ongoing capex). As I have bored readers with before, this is a company I like and I still see value in, with the UK still a net importer of bricks (an even more expensive policy given the Pound's recent fall) at a time when more - not fewer - houses need to be built. Of course, the housebuilders remain an area I am still unconvinced about (due to their reliance on government support and related) but their ability to try to beat up their brick suppliers is doomed to fail (as witnessed by many housebuilders noting higher costs/lower margins). Sensible valuation, a decent yield and a good balance sheet means I am still not bricking it about continuing to hold this one...and it seems that the wider market is starting to appreciate its attributes too. Buy anticipating something closer to 300p.
Filed under: Ibstock, BigDish, Redhall, Westminster Group, LPA Group, Merlin Entertainments
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