27 October 2024
This low-cost operator is a leader in a fragmented market, which saw many smaller players shutting down during COVID and subsequent inflation surge. The company used its cost leadership to expand its market share to 12% (from 6% in 2010).
The company can grow earnings by 60% in the next five years with an additional £2bn shareholder distributions (34%). Shareholders could earn 18-19% annual returns per year, on our estimates.
The company stands out by running a vertically integrated model, not relying on franchisees. This helps the company to maintain tight cost control and high quality of service.
The company has recently started to optimise its real estate portfolio. Using market values, we estimate it could be worth £9.6bn, more than the company's entire market cap.
Its low-cost operating model and a vast under-monetised real estate portfolio remind us of a combination of the low-cost airline Ryanair and a housebuilder, Vistry, which is exiting its landbank to focus on construction service. This should improve the return profile of the business, making it less capital-intensive and less cyclical.
The company can grow earnings by 60% in the next five years with an additional £2bn shareholder distributions (34%). Shareholders could earn 18-19% annual returns per year, on our estimates.
The company stands out by running a vertically integrated model, not relying on franchisees. This helps the company to maintain tight cost control and high quality of service.
The company has recently started to optimise its real estate portfolio. Using market values, we estimate it could be worth £9.6bn, more than the company's entire market cap.
Its low-cost operating model and a vast under-monetised real estate portfolio remind us of a combination of the low-cost airline Ryanair and a housebuilder, Vistry, which is exiting its landbank to focus on construction service. This should improve the return profile of the business, making it less capital-intensive and less cyclical.