Interactive Investor

Insider: Trainline team think shares are a bargain

1st June 2021 09:25

Graeme Evans from interactive investor

Directors think sellers are on wrong track after stock plunges more than a third in quick time.  

Trainline (LSE:TRN) bosses have spent £250,000 on company shares after seeing plans for a rival Great British Railways ticketing app send the FTSE 250-listed stock down a third in value.

Jody Ford, who has been chief executive since September, and chairman Brian McBride, whose CV includes roles as Amazon UK boss and chairman of fast fashion retailer ASOS (LSE:ASC), bought £100,000 and £50,000 of shares respectively.

Their purchases were followed on Friday by non-executive director and former Ocado (LSE:OCDO) finance boss Duncan Tatton-Brown picking up just over £100,000 worth of shares.

The insider dealings have helped to draw a line under a six-day losing streak, although investors appear reluctant to jump back on board until they've heard in more detail how the company intends to respond to the Williams-Shapps plan for UK rail.

Coming days after the company reported an annual operating loss of £100 million due to Covid-19 disruption, the wide-ranging government review revealed the intention to simplify the system of ticket sales through a new state-run body.

Shares fell more than 20% on the day, despite Ford's attempt to highlight positives in the report such as the commitment to digital ticketing and continued role for independent retailers.

Analysts at Berenberg noted at the time that what's proposed is not hugely different to the current set up where train operating companies are able to sell tickets across the network.

Some are run through white label arrangements with Trainline, and the City broker suspects that the company's technology could be used in a similar way for the new platform.

It sees other positives through plans to introduce flexi tickets in response to working from home trends, which could unlock the season ticket market for Trainline. Less favourable is the proposed expansion of contactless payments on more city routes.

The biggest factor driving sentiment at the moment, however, is the continued uncertainty about just when the Great British Railways ticketing operation will get underway.

Trainline generated revenues of £178 million from UK consumers in the year to March 2020, a period only partly impacted by the Covid-19 pandemic, and which also included coach tickets for National Express. The company also has two smaller divisions targeting business travel and the sale of international tickets.

The shares were priced at 350p in the June 2019 IPO, which valued Trainline at £1.7 billion in one of the UK's biggest listings of that year. They rose as far as 547p prior to the pandemic before reversing to 256p by November.

They were back at 500p by early March and at 438p when non-executive Jennifer Duvalier spent £20,000 on shares in the aftermath of the company's annual results. 

Ford bought his shares at 277p and McBride at 267p, while Tatton-Brown made his purchase at 286p. The shares have been among the most shorted on the London stock market, with the investment management business of George Soros among those to have benefited from the sharp slide in value.

Exec bets on a bounce at Avon Rubber

Another FTSE 250-listed stock enduring a tough 2021 is Avon Rubber (LSE:AVON), having been one of the best performing over the previous year amid a surge in demand for its protection systems used by the military and first responders.

Last week's interim results showed a 46% jump in order intake, leading to a 28% rise in adjusted earnings per share and 30% hike in dividend to 14.3 US cents.

But sentiment has been hit by uncertainty over delays to the product approval process for some US ballistics protection contracts within the military business, sending the shares sliding from their all-time high of 4,650p in early December.

The absence of upgrades to full-year guidance contributed to shares falling 11% on the day of last week's results, even though chief executive Paul McDonald remains hopeful of commencing shipments from the delayed contracts at the start of the 2022 financial year,

Non-executive director Bindi Foyle took the opportunity last Thursday to buy £10,400 worth of shares at a price of 2,976p. She has been on Avon's board since May last year and is the current finance director of aerospace and defence products manufacturer Senior.

Her previous purchase of Avon Rubber shares was made in December at a price of 4,173p.

Avon Rubber revealed last week it is to change its name to Avon Protection after a year of transformation including November's acquisition of the Team Wendy helmets business. The group was founded in 1885 as a rubber manufacturer and went on to produce everything from tyres and conveyor belts to milking machine tubes.

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