Broker tips: Asos, The Pebble Group

10th Sep 2024 15:48

(Sharecast News) - Barclays downgraded Asos to 'underweight' from 'equalweight' and cut its price target to 290.0p from 300.0p as it said the online fashion retailer was no longer just a refinancing story.

Barclays said that over the past three months, it felt that the biggest driver of Asos's equity story was around its ability to refinance.

"The Topshop transaction/re-fi is now done and removes some of the equity overhang/balance sheet risk into FY26. Our balance sheet analysis suggests that there is FY27/28 debt that could need refinancing, meaning earnings/FCF delivery in the mid-term is important," it said.

Barclays said the outlook remains challenging from a competitive standpoint and sees a risk to consensus numbers both in FY25 and into the mid-term. Its slightly lower forecasts were now 22%/15% below Bloomberg consensus adjusted EBITDA for FY25/26, respectively.

"Additionally, with higher interest costs post re-fi and adjusting for royalty payments to the JV, we are now not forecasting positive FCF/earnings per share until FY27, which makes valuation more challenging, in our view," said Barclays. "With the positive catalyst of the re-fi now played out, we think the focus shifts to Asos's fundamentals, and we view the risk/reward as skewed to the downside."

Analysts at Berenberg took a fresh look at the Pebble Group on Tuesday following the group's interim results a day earlier.

Berenberg said Pebble Group's H1 earnings were in line with its July trading update and noted that management reiterated that the company was on track to meet FY24 market expectations.

Group revenue was £60.8m and adjusted underlying earnings came to £7.4m, down 4% and 1% year-on-year, respectively, whie both Brand Addition revenues and Facilisgroup KPIs were considered "positive indicators" of the overall health of the promotional products market.

"The group looks to have made operational progress over the last 12 months including key new hires as Pebble aims to accelerate growth, and we expect the company to benefit from these actions when the industry recovers. We trim our forecast due to more unfavourable FX rate assumptions. The shares trade on 12.3x CY24 P/E," said the German bank.

Berenberg stood by its 'buy' rating and 150.0p target price on the stock.