Wednesday tips round-up: Asos, Whitbread, Carpetright

12th Dec 2012 05:47

On Tuesday Nick Robertson, Asos's ebullient chief executive, revealed that UK growth was accelerating again after a wave of price cuts. The company reported a 24% increase in domestic sales, a rate of growth that compares with a 4% at its lowest point last year. That allayed concerns that it might be reaching maturity in the UK. The renewed domestic growth is a double whammy, since it implies that the prospects for international expansion are even greater than previously thought. If Asos can grow at 24% in its oldest market, then the scale of its business in the United States, where it grew 57% in the first quarter, can only be guessed at, much the same as China, where it expects to begin trading in a year's time, writes The Times's Tempus column. Not only that, the newspaper wonders aloud if the company's shareholder, Danish group Bestseller, which is also present in Asia´s powerhouse, might not be interested in making a bid. Nevertheless, the company´s shares do trade at 49 times earnings currently, and the likes of Amazon.com and TMall will not just sit idly by and just watch. Take a deep breath and hold, Tempus concludes.Given his relatively discreet character, when Whitbread chief executive - Andy Harrison - took the helm two years ago, there were fears that this might be to the detriment of such a high-profile British institution with household names in its portfolio including Premier Inn, Costa Coffee, Brewers Fayre and Beefeater. But yesterday's third-quarter numbers show that there is more than one way to skin a cat. The former easyJet chief executive delivered like-for-like sales growth of 3.3% in the 13-week period to November 29, with total sales ? including new openings ? up 14.4%. The like-for-like growth rate was slightly below the first half but that is still, by any measure, impressive stuff ? all the more so for a consumer-facing company in such dismal economic times. Buy and tuck away says the Times´s Tempus column. At an April 2013 earnings multiple of a staggering 66.7 times, falling to 41.7 next year and 27.5 in 2015, Carpetright shares are defying gravity, says The Telegraph´s Questor team. Sure profits will recover - but even if they went to up their peak earnings per share of 71p achieved in 2005, the shares would still be on a multiple of 9.6 times, it quips. This would be a more appropriate earnings multiple of this stage in the cycle, but it will clearly be years before that level of profitability returns - if it materialises at all. So why are they on such a heady rating? Well the shares are tightly held, with founder and current chairman Lord Harris of Peckham and his family owning almost 30pc. It even has Bill Gates as a shareholder. The company is also the market leader and has significant operational leverage to an upturn, during which the company should throw off a lot of cash. The store refurbishment programme is boosting sales and the company's move into selling beds appears to be going well. The rating is probably also down to the fact that some think that the cash-generative company could be taken private. "There is no doubt that Carpetright is a well managed business. The fact it remains cash generative during such turbulent times is a testament to this. However, the valuation is so stratospheric - and Questor strongly believes that shares should not be bought on bid hopes alone - that they can only be rated an avoid," the newspaper says.ABPlease note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.