Puma "hold"

07.05.07 - AC Research

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

According to AC Research?s research note published this morning, the company has posted its 1Q07 earnings results. In that period, PUMA could increase its consolidated sales revenues by 2% y/y to ?655.8 million. Adjusted by exchange rate effects, however, the growth rate was considerably higher at 7.4%, the analyst mentions. The gross yield margin was off slightly by 0.2 points to 52.2%. Operating EBIT was up 2%, climbing to ?134.8 million. Earnings before taxes rose 2.3% to ?137.2 million, while profits after taxes saw 3.7% growth to ?96.6 million, or ?6.02 per share.

In all, the published results were in-line with the estimates, the analyst says. For the full year of 2007, Puma has reduced its outlook, projecting low single-digit sales and earnings growth. Previously, the company had guided to medium to high single-digit sales growth. This profit and sales warning is made on the basis of an order backlog, which towards the end of the first quarter, was 3.1% below last year?s level. Here, the American region saw a particularly negative development with a 16% decline in order backlog. AC Research also expects a slight increase in the cost quote to a share of about 35% of the company?s sales.

Against the backdrop of a rather disappointing outlook on the full year of 2007, the company?s stock seems to enjoy a rather adequate rating, with Friday?s closing price of ?336 and a 2007 P/E ratio of about 18. Moreover, Puma?s stock is secured against losing ground through plans for a friendly takeover bid by Pinault-Printemps Redoute of ?330 per share. One may also not exclude that other interesting parties for a Puma takeover might be forthcoming, which could result in a bidding war. Currently this is not considered as a very likely scenario though, the analyst says. The company?s share price in the next few weeks is likely to be influenced by speculations of a takeover rather than by results from operations, the analyst adds.

AC Research reiterates its "hold" rating on Puma.