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THG share price collapse "unjustified", says Liberum

Wed 13 October 2021 15:56 | A A A

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(Sharecast News) - Broker Liberum said on Wednesday that the collapse in the THG share price a day earlier was unjustified.

Shares in the company tumbled 35% on Tuesday after it held a capital markets day, with analysts noting that the event failed to assuage investor concerns about the group's Ingenuity sales platform.

But Liberum argued that the selloff was overdone.

"The pace of new client sign-ups at THG Ingenuity Commerce, the roll-out of new websites, and the testimonials from clients underpins our confidence in the value of the Ingenuity business and its ability to scale revenue rapidly," it said.

"The company could have shared more detail on the economics and its ambitions/targets for Ingenuity revenues, however, our own calculations based on available data suggest scope for rapid scaling of revenues and a minimum £1.75bn valuation for Ingenuity Commerce."

The broker said that while the CMD did not allay all of the market's concerns, the share price collapse now offers a "very attractive" entry point for a business which it believes is still worth £10bn+.

"There are multiple ways for THG to drive value, including potentially selling its Nutrition division while Ingenuity continues to service it, or bulking up Beauty, which is due to be separately listed, with branded M&A.

"However one cuts the valuation, the shares appear well oversold."

Liberum maintained its 'buy' rating on the shares but cut the price target to 750p from 1,080p.

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