Interactive Investor

Insider: these three shares are too cheap say company chiefs

10th October 2022 08:30

Graeme Evans from interactive investor

Money talks, and the amounts being used to snap up stock in these bombed-out businesses suggests directors are confident about prospects.

Three directors at events business Hyve Group (LSE:HYVE) have drawn a line under two years of turbulence by spending £135,000 on shares at prices no different from the period of pandemic lockdowns.

The purchases by chief executive Mark Shashoua, chairman Richard Last and finance boss John Gulliver reflect their optimism over trading prospects after Hyve said on Wednesday that the speed of its recovery from Covid disruption had “surpassed expectations”.

Two days earlier, Hyve revealed a new £135 million debt facility in a move allaying any covenant worries in the City and putting the company on a steadier longer-term financial footing.

Shares finished the week at 55.7p, an improvement on Monday’s 54p but a long way short of the 125p target held by analysts at Investec and Numis and the 210p estimate at Citi.

The former FTSE 250-listed stock fell from its pre-pandemic 800p to a low of 51p in October 2020 and has struggled since then as economic conditions deteriorate.

This lacklustre performance has come despite the lifting of Covid restrictions helping revenues to return to 90% of 2019 levels when excluding China, where there remains considerable disruption to event schedules.

Positive trading momentum has continued into the new financial year after Hyve reported forward bookings of about £68 million compared with £50 million this time last year.

Two of the largest events in the group’s calendar took place in September, with the Autumn Fair for the home, gift and fashion industry at Birmingham’s NEC significantly outperforming previous editions.

Hyve’s Groceryshop event in Las Vegas also reported revenues more than 40% higher than its largest pre-Covid edition after attracting more than 3,000 attendees.

About 30% of revenues are now generated in the US, where the recent strengthening of the dollar against sterling is expected to have a positive impact on 2023 results.

Shashoua, who bought 100,000 shares at 54.7p following this week’s update, said: “It is clear that our business has now almost fully recovered from the turbulence of the last two years.”

Numis Securities said shares looked to be excellent value as the return of business-to-business events and the omnichannel strategy should drive “attractive, above market growth”.

It added: “Hyve now has debt facilities and balance sheet security in place for the next four years, allowing more focus on good event recovery and fundamentals.”

Noting that Hyve currently trades on about five times 2024 earnings, Investec said: “With the recovery still on track, refinancing completed, pricing power in place and relatively limited cost inflation, we believe this remains too cheap, particularly in a consolidating industry.”

Maiden purchase and a profits warning

In the FTSE 250 index, Currys (LSE:CURY) chair Ian Dyson has spent £122,000 in his first purchase of the retailer’s shares since joining the board last month.

The investment by the former Marks & Spencer Group (LSE:MKS)r finance boss took place on Wednesday at 61p, which is where the shares stood during the first Covid lockdowns in April 2020.

The company last month paid a final dividend of 2.15p a share as part of the return of £78 million, but shares have fallen from 120p earlier this year due to inflation pressures and the deteriorating climate for big ticket purchases. They closed last week at 62.5p.

Elsewhere in the second tier, four Synthomer (LSE:SYNT) directors have backed the specialist chemicals company after the shares were hit by a profit warning at the end of September.

The purchases worth a combined £90,000 were made at prices as low as 106p, having slumped from more than 500p just under a year ago.

The company, which was known as Yule Catto until 2012, benefited in the pandemic from a surge in demand for nitrile rubber gloves. However, the impact of resulting high inventory levels at hospitals and other workplaces is not expected to fully unwind until the end of 2023.

With the company’s construction and coatings end markets also slowing, it warned that full-year earnings will be between 10% and 15% below previous expectations.

Management is due to meet investors on Wednesday, when topics will include the company’s strategy and the new adhesive technologies division. Last week’s buyers of shares included chief financial officer Lily Liu and the non-executive director Lee Hau Hian, who made the biggest purchase with an investment worth almost £40,000.

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