'A lot of things could go wrong' - Berenberg cuts Basic-Fit

Basic-Fit

26/07/2022 09:00

** "A lot of things could go wrong" Berenberg says as it
cuts Dutch discount gym chain Basic-Fit  BFIT.AS  to "sell" from
"hold", citing risks to the group's 2022 guidance stemming from
inflationary pressure
    ** "The environment Basic-Fit is facing has considerably
deteriorated compared to when its 2022 guidance was announced,"
it says
    ** Berenberg believes depressed consumer confidence and
purchasing power are likely to slow membership growth and
increase an already-elevated churn rate 
    ** It also expects inflation to raise clubs' cost bases,
while Basic-Fit's  decision to not raise prices limits its
ability to offset this
    ** Moreover, Berenberg thinks Basic-Fit's eight-year
expansion plan will require outside funding
    ** While seeing this plan as too ambitious, "we believe that
it implies capturing more than 100% of its addressable market
growth over the rest of the decade," it says
    ** It estimates this could amount to a further EUR 220
million equity raise or debt issuance, increasing the company's
exposure to rising interest rates
    ** Basic Fit shares drop around 6%

    

 (Reporting by Dina Kartit)
 ((dina.kartit@thomsonreuters.com))