Kitwave – having fallen back from the 2024 High of 409.50p, this group’s shares before its 2024 results look undervalued at 285p, brokers 495p TP

18.02.2025

Within the next fortnight we will see the 2024 Final Results being declared by Kitwave Group (LON:KITW), they will highlight the progression of the wholesale delivery business, together with its potential to carry on moving forward.

The Business

Established way back in 1987, following the acquisition of a single-site confectionery wholesale business based in North Shields, Kitwave is a delivered wholesale business, specialising in selling and delivering impulse products, frozen, chilled and fresh foods, alcohol, groceries and tobacco to approximately 46,000, mainly independent, customers.

The enlarged group has a network of 37 depots, enabling it to support delivery throughout the UK to its diverse customer base, which includes independent convenience retailers, leisure outlets, vending machine operators, foodservice providers and other wholesalers, as well as leading national retailers.

The company specialises in selling impulse products, frozen, chilled, and fresh foods, alcohol, and groceries.

Its segments include Ambient, Frozen, and chilled, and Foodservice.

The Ambient segment provides delivered wholesale of ambient food, drink, and tobacco products.

The Frozen and chilled segment provides delivered wholesale of frozen and chilled food products.

The Foodservice segment provides delivered wholesale of alcohol, frozen, chilled, and fresh food to trade customers.

Its product range includes branded lines, branded drinks, crisps and snacks, beers and wines, bottled waters, weigh outs, and tobacco.

It also offers wholesale commercial catering supplies.

It specialises in in the supply of ice cream, ice lollies, and convenience frozen food. It also carries a core range of branded beers and wines.

The group's growth to date has been achieved both organically and through a strategy of acquiring smaller, predominantly family-owned, complementary businesses in the fragmented UK grocery and foodservice wholesale market.

Latest Trading Update

Issued on Thursday 7th November 2024, the group issued a pre-close Trading Update for its year to end-October.

It noted that it had experienced robust trading over the summer, which is traditionally its busiest period.

With sales through to the end of October 2024 being as anticipated, the Group expects to report full-year results in line with market expectations.

Moving forward the group is well-positioned to continue to execute its organic and mergers and acquisition strategy during 2025 and beyond.

Management Comment

CEO Ben Maxted stated that:

"Our platform for growth remains strong, with our network now at 37 depots.

The Group looks forward to reporting its FY 2024 financial results in March 2025, which are expected to be in line with market forecasts, and also providing an update on the early progress made in 2025."

The Equity

There are some 80.44m shares in issue.

The larger holders include Liontrust Investment Partners (6.88%), Ninety One UK (4.35%), BlackRock Investment Management (4.34%), Premier Fund Managers (4.33%), Canaccord Genuity Wealth (4.04%), Norges Bank Investment Management (2.87%), Close Asset Management (2.59%), Harwood Capital (1.87%), and Santander Asset Management (1.67%).

Analyst’s Views

Analyst Nigel Parson, at Cavendish Capital Markets, has a 450p Target Price out on the group’s shares.

For the year to end October 2024, his estimates are for revenues of £683.4m (£602.2m) with adjusted pre-tax profits of £27.8m (£27.5m), earnings of 28.1p (29.8p) and a dividend of 11.3p (11.2p) per share.

For the year now underway the analyst looks for £843.7m sales, £35.7m profits, 32.6p earnings and paying a dividend of 12.1p per share.

Mark Photiades, at Canaccord Genuity, rates the group’s shares as a Buy, with a 495p Target Price.

For 2024 he estimates £685.2m sales, profits of £28.5m, earnings of 29.0p and a dividend of 11.3p.

The 2025 year, he estimates, could see £850.5m in revenues, with £35.9m profits, earnings of 33.0p and a 12.0p a share dividend.

For the 2026 year to end-October, he has £875.5m in turnover, £38.3m profits, earnings of 35.2p and 13.0p per share in dividend.

A total of five analysts follow the company, all rating the group’s shares as a Buy, with the consensus average Target Price of 473p per share.

In My View

Apart from defining the hit that the Budget will have impacted the group, I feel that its buying and building strategy will see the group continue its growth over the next few year.

Kitwave's St Austell warehouse

The group’s shares, which were 409.50p in late April last year, are currently trading at just 285p, valuing the whole group at only £230m, look to me to be ready for another upward move, hopefully helped by a boost from good corporate news on Tuesday 4th March.