London, UK, 21 December 2021

Studio Retail Group (STU): Revenue aspiration with a wow factor

Studio Retail Group (SRG) is a focused play on the growth of online value non-food retail. Management's aspiration to accelerate medium-term revenue growth, to a CAGR of 10-15% over four to six years, is expected from gains in active credit customer numbers and spend per customer. SRG's valuation is at a significant discount to its own historical multiples (despite an improved medium-term growth aspiration), its peers and our DCF-based valuation of c 420p per share if it can achieve its aspirations.

SRG's FY22e EV/sales multiple of 0.3x and P/E multiple of 5.0x are well below its long-term averages despite it now offering a more focused portfolio with an improved medium-term growth outlook. It also trades at a significant discount to online and offline peers despite attractive relative margins. A DCF-based valuation, which includes the assumption that management meets its £1bn revenue target by FY27 (year six), indicates a share price of 420p/share. The Frasers Group shareholding of c 27% represents an overhang to share price performance. 

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