The new CEO of diversified infrastructure company Stobart (STOB) Warwick Brady had bold plans for the company when he took over from Andrew Tinkler in June.
When Shares spoke to the pair in May, Brady said he wanted to turn what was a £829m company into an over £2bn behemoth in five years. The company’s current market cap is over £1bn so Brady is certainly moving in the right direction in terms of size.
In May Brady’s described Southend Airport as ‘London’s best airport that can support over 10m passengers a year’. The company’s trading update on Tuesday says that passenger numbers have increased by 22% to 482,000 in the five months to 31 July so while a long way off the original target, again it’s good news.
Stobart has set a new Southend passenger target level for the end of 2018 at 2.5m, a far more realistic number and given Brady’s background as chief operating officer of easyJet, one within reach. In fact easyJet has confirmed stationing a fourth plane at the airport.
The market’s reaction to Stobart’s update was muted, its share price staying broadly flat at 293.4p.
Uncertain times
One of the concerns highlighted by Stobart is securing new airlines to use Southend airport which is taking longer than anticipated. Broker Stifel says this is ‘probably not helped by Brexit’.
Stobart also supplies biomass to power stations across the UK and there were delays to some of the new stations meaning that only a fraction of the material was supplied. Due to these delays, Stobart will take a £1.6m hit although will look to recoup some of the costs from the power stations as the delays were outside of the company’s ’control’.
The company is trading on 7.8 times 2018’s 37.5p per share of earnings based on Cenkos’s forecasts. Sticking with Cenkos’s forecasts, the company has a dividend yield of 5.6%.
Stifel puts a target price of 329p on Stobart implying a 12% upside. Brady must hit his ambitious targets for the company for it to really shine.
