Puma ?accumulate?

07.08.06 - AC Research

LONDON, August 7 (newratings.com) - Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on Puma (PUM).

According to AC Research?s research note dated August 4 and published this morning, the company has published its 2Q06 earnings results. Puma was able to raise its sales revenues by 38.2% y/y to ?547 million in 2Q06. Due to effects of its regional expansion and a rather elevated amount for investments, expenses for operations were up 54.4% to ?211 million. In this context, expenses for marketing/retail efforts, in particular due to the FIFA World Cup, were up 61.7% to ?207 million. Due to high investments into the brand, operating profits were off 15.4% to ?69 million. Earnings before taxes were off 14.5% to ?71 million. Finally, the company?s earnings after taxes declined about 14.9% to ?50 million, or ?3.12 per share.

In all, the published results were in-line with expectations, the analyst says. For the full year of 2006, Puma continues to expect sales to grow up to 35% and operating profits to decline in the range of 10% to about ?360 million. Considering an order backlog that climbed 32.2% to ?1.02 billion by the end of June, AC Research believes the company would be able to meet its targets.

Puma now projects a sales potential of up to ?4 billion by 2010. In this context, the company plans within the scope of the so-called phase IV of the corporate development to open up a new product category each year. Next year, for instance, Puma intends to introduce a new swim wear collection. On top of that, the company plans to further promote its expansion.

At the current share price of ?277.40 and a 2006 P/E ratio of about 17, Puma?s stock still seems to enjoy a rather moderate rating, according to the analyst. In the course of a reinforced focus on the enhancement of earnings, the company is expected to generate substantial profit growth in the following fiscal year. In the course of a probably positive fundamental development of Puma?s share price, it cannot be excluded that the company?s stock may be accepted into the DAX selection within the next few quarters, the analyst says.

AC Research reiterates its "accumulate" rating on Puma.