Within Wynnstay Group's agricultural supplies business, the animal feeds division has seen volumes recover to more normalised levels (there was a 12% like-for-like reduction in FY09) as poultry feed demand continues to grow. In the arable division, fertiliser sales have started well, with increased demand as we approach the spring period – fertilizer is everyone’s favourite at the moment!
Seed sales overall have been very good although, as anticipated, they are not expected to match last year’s record level. In specialist retailing Wynnstay Country Stores enjoys a high degree of predictable income from its farmer customer base and they are continuing to upgrade the store network. Sales at the Just for Pets chain continue to grow and they are about to open a 16th store, at Bentley Bridge in Wolverhampton. The scope to expand the chain further remains very good and they will be adding further new stores during 2010.
The house broker commented that Pets At Home was purchased for a multiple of 13.6x historic EBITDA, which recognised the growth potential in the dedicated pet products store sector – Wynnstay’s pet retail chain is the fifth largest in the UK and a tiddler compared with Pets At Home which has 250 outlets. However, with this in mind, the target price has been raised from 285p to 300p (current price 263p).
For the year ending October 2010, the house broker is estimating earnings per share of 28.1p resulting in a PER of 9.35x. Net assets at 31st October 2009 were £39.5m including tangibles of £15.5m. Net debt was £5.7m resulting in net gearing of a modest 14%. Cash generation is also excellent. Seemingly good value especially if the pets business continues to grow as anticipated.
