Endeavour Goup (ASX: EDV) Share Price Sails On

Key Points

  Trading well ahead of pre-COVID-19 levels   Strong revenue recovery in hotels   Revenue of $3.03bn   Endeavour Goup (ASX: EDV) Share Price sails on with the post Covid wind in its sails. Endeavour Group (EDV) First Quarter Market Update. The share price is up 1.8% on the release.

What happened?

This morning Endeavor Group (EDV) released a market update confirming their sales guidance. The group confirmed a 3.1% increase in sales for the business, with hotels enjoying a strong bounce back from COVID-19, with 90% growth expected in Q1 F23. The retail sector of the business has lagged, with sales down 6.2% to $2.49bn. Endeavour believes this is due to the increased sales during the COVID-19 lockdowns. All states have a notable increase in sales, except NSW and VIC, which were subjected to lockdowns in the previous corresponding quarter. Yet, business remains strong, as retail sales increased 13.9% from pre COVID-19 levels. Endeavour CEO Steve Donohue believes, “Central to our success is our focus on our customers…My Dan’s active members grew to 4.7m in the quarter, up from 4.5m at the end of F22.” Showing a rapid uptake in customer loyalty. Going into the Christmas season, the group is expecting the demand to continue as the first restriction-free festive season in three years kicks off. The biggest growth factor for the company was the 90.8% growth figure for their hotel distribution. Across all areas of food, drinks, and gaming, they have seen a significant increase. Food services have led the way in recent months, with the category rapidly developing.  

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The Fundamentals

The fundamentals for EDV is nothing to get too excited about. The company has a PE of 22.9x, which has dropped compared to recent years and is expected to continue falling over the next few years. EPS growth is outpacing revenue growth in three of the next four years, which is good to see. The gross yield of 4.9%, is not overly exciting, but dividend growth is expected in 3 of the next four years, with a steady payout ratio of around 73%.   Technically, the chart is not awe-inspiring either, Marcus’ simple trend technique of squinting your eyes and looking where the chart is roughly heading shows it's not doing anything special. It has been on a significant downward trend since mid-August and is not showing obvious signs of a recovery.  

Broker stuff

The broker recommendations further highlight the lacklustre story for EDV - an average target price of 714c, implying a 3.9% upside. UBS recommended EDV as a sell on Friday, expecting revenue of $3bn at the first-quarter update, the broker has lowered its FY23 EPS forecast on lower cashflow forecasts and a decline in the trading multiple. Ord Minnett also provided an update on Friday, although issued a buy recommendation, with the broker expecting the electronic gaming machine revenue to drive a 4% lift in FY23 earnings.  

Conclusion

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