Gyg PLC (LON:GYG) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview
Q1: Global Yachting Group (Gyg), what are your thoughts on the company?
A1: We initiated earlier this week on the company, it’s a world-leader in terms of painting and maintenance in the super yacht sector. It’s widely recognised for quality and excellent project management and it’s involved in some of the world’s biggest, most prestigious super yachts in the world as well. There’s 3 core streams to the business, you’ve got refit, new build and repair as well, we expect the business to grow substantially for the next couple of years as it leverages its global market position.
Q2: You on about growth there, what can you tell me about their growth strategy?
A2: I think there’s a number of ways in which the business can grow, we’d expect the business to grow the number of new build projects as its doing at the moment and we’d expect further progress on some key projects in Germany, Holland and some of the Italian shipyards as well. There’s potentially growth in its retail business too and I think the refit business, where it’s already very strong, we’d expect further organic growth here. I think the business is well positioned to supplement this organic growth with key strategic acquisitions which we’d expect further down the line.
Q3: Gyg were admitted to AIM in July this year, what can you tell me about your forecast?
A3: So, in terms of our forecast assumptions, we’re expecting a three-year revenue CAGR of about 10% for it to 2020, we’ve been fairly prudent on our gross margin assumptions and we are expecting some good EBIDTA margin progression as it leverages its cost base and finds some further synergies as well. So, we’d expect the EBIDTA margins to meet closer to 15% by 2020 and that’s before we consider any strategic acquisitions that it may well do further down the line.
Q4: Now, the share price has crept up slowly since IPO, what are your thoughts on the stock value at the moment?
A4: We think the valuation for Gyg PLC is still very reasonable so the December year-end PE to ‘17, it’s on PE about 12 times, falling to 10 times in ’18, 8 times in ’19 as the growth comes through, EV/EBITDA is below 9 times to ’17 and falls to below 6 times in ’19 in our forecasts. There’s an excellent free cash flow yield of over 10% in the business and the business is asset-light as well and the return on capitals should be well in excess of 30%, based on our forecasts. There is also a healthy dividend yield of over 5% from 2018 as well which we think is very attractive for investors given that growth profile.
