Cantor Fitzgerald Europe reiterates BUY on flooring specialist
Victoria (BUY) – Enlightening capital markets day
VCP LN (426p, TP 475p from 425p), Market Cap: £387.5m
In the update on strategy, it is clear the company is now focused on reducing logistics costs with the help of consultants by between 100bps and 200bps over the medium term. It is also prioritising an acquisition of a hard floor coverings business in the UK and a leading floor coverings business in Europe. It now has a significant ‘war chest’ for acquisitions and on our estimates has the ‘firepower’ to add another £25m on our estimates through debt assuming net debt does not exceed 2.5x EBITDA in FY18. The stock, which has risen by 40% since November, could see a period of consolidation. It remains, however, undervalued, in our view, at 15.4x our FY18 earnings forecasts. We reiterate our BUY recommendation but raise our TP to 475p from 425p, which broadly puts the stock on 17.5x FY18 earnings and is in line with our medium term earnings growth forecasts.