Lighting the touch paper
Marks Electrical’s proven ability to serve the sizable UK major domestic appliance market with premium products on a next day delivery basis is central to its impressive growth story. The company’s combination of proprietary technology, scalable business model, ample demand headroom and demonstrably high-quality leadership supports the case for a higher valuation than so far awarded by investors. This report argues that a fair value / share is 150p.The group’s core operating model benefits from a 5-pillar approach which embraces up-to-date technology, a simple and proven distribution network, a scalable delivery model, premium products, and the importance of a favourable online user experience. These qualities should mean market share gains and sustainable financial strength.
Marks Electrical as a brand has substantial room to grow its recognition and overall identity, which means that reinvestment in the brand should generate notable returns. The company is actively increasing its own brand awareness and thus enhance sales in key regions. Aside from cash investment the Marks Electrical brand can benefit reputationally from the integrity of both the premium branded product and service offering – i.e. the “Marks Electrical Difference.”
This is a well-run business with a dynamic leadership team. The group is centrally run from a single site in the logistically convenient city of Leicester, close to the UK’s all-important M1 motorway. Operating as a single site business massively simplifies daily running of the company’s delivery system. In addition, it allows employee performances to be enriched by a ‘tight’ focus and a common ambition to provide best-in-class service.
Prospects look exciting. First, the scalable nature of the business should deliver increased operating margins even after brand promotion. Second, there is scope to sustain growth from relatively low inventory levels which has clear, positive implications for free cash flow. At our 150p fair value level the implied ratings are an FY2023 EV/sales ratio of 1.6x and 19.1x EV/EBITDA.
Equity Development enables companies to become better understood and supported by investors. Since our launch in 1996 we have consistently focused on helping our clients improve their communication and relationships with both existing and potential shareholders. Our clients have come from a wide variety of sectors and domiciles, are both private and quoted and range in size from micro-cap to $multi-billions. We offer free access to company research notes written by experienced analysts. These notes include detailed forecasts, financial models and a fair value. We host regular Private Investor Forums at which investors have the opportunity to hear company directors present, and to ask questions. These are free to attend. We broadcast live Webinars with company management that include active Q&A. We also make the recordings available online. We arrange face to face meetings between private investors and company management. We are active users of Twitter, commenting daily on company news, share price moves, Directors’ Dealings, Equity Development Research Notes & Events.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.