Puma ?accumulate?

31.05.06 - AC Research

LONDON, May 31 (newratings.com) - Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on Puma AG (PUM).

According to AC Research?s research note dated May 30 and published this morning, the President of the Board, Jochen Zeitz, announced in the "Tagesspiegel" that Puma would present the new swimwear segment in its next spring programme. The products will then be available from 2007, the analyst mentions.

This measure seems to make a lot of sense, the analyst says. Prior to this, the company had already announced its plans to tap a total of six new business segments. Puma had already presented its own jeans collection as well as motor sports and golf products, the analyst mentions. On a global scale, the swimwear segment is among the largest product groups within the entire sports sector, AC Research points out. Therefore, the company expects high sales potential in this new business segment for the next few years. It seems that Puma?s goal of generating sales in double-digit millions from scratch in this segment may well be reached, the analyst says. The company has a good branding, according to AC Research. The analyst expects the rather high popularity to help in rapidly establishing the brand in the swimwear segment as well.

At the current share price of ?295, the company enjoys a 2006 P/E ratio of about 18, the analyst mentions. Currently, Puma is engaged in an intensive campaign for expansion, consequently tapping new business segments, the analyst says. In late March, the company announced its engagement in the eyewear business. The tapping of new business segments enables Puma to place its future growth on a broader basis, AC Research points out. The strong branding also helps to rapidly establish new products on the market, the analyst adds. Considering all this, the analyst expects healthy growth for the company within the next few years. Due to an increased investment into future growth, however, Puma?s earnings for the ongoing year are expected to decline, the analyst mentions. But from 2007, the company should again be able to realize earnings growth, AC Research adds. Considering the rather elevated growth potential and the current share price, the analyst says that there is modest upside to the company?s share price.

AC Research reiterates its "accumulate" rating on Puma.