# Zeus Capital Q&A with Mike Allen: Gyg PLC (LON:GYG)

- Link: https://www.directorstalkinterviews.com/zeus-capital-qa-mike-allen-gyg-plc-longyg/412749696
- Published: 2018-04-20T12:45:28+01:00
- Author: Amilia Stone

**Gyg PLC** (LON:GYG) is the topic of conversation when Zeus Capital’s Head of Research
Mike Allen caught up with DirectorsTalk for an exclusive interview

 

**Q1: Global Yachting Group (GYG) released its year-end results yesterday, what 
kind of flavour did you gain from the report?**

**A1**: The results that they delivered, full year to December, very respectable
growth during 2017 in what proved to be a very productive year for the group as 
it successfully made its transition onto the AIM market.

Revenues were up 14.7% year-on-year, EBITDA went from €6.7 million to €7.2 million,
an 8% increase, and we saw a similar increase in adjusted earnings per share as 
well. Net debt fell from €10.4 to €6.7 million albeit largely the drop there was
due to the funds from the IPO.

Overall, very respectable mainly organic growth that was delivered in this year 
in what proved to be a busy year for them.

 

**Q2: What can you tell us about the market dynamics?**

**A2**: The market dynamics are very positive indeed really, the super yacht new
build and refit painting business continues to grow at around 6%, the refit market
within that is very strong as well. I think the dynamics behind that, we expect 
the number of billionaires globally to grow by a CAGR of about 9% to 2020 and that
correlates very strongly with the number of super yachts in existence. The size 
of the super yachts continues to grow as we expected during the IPO as well and 
Gyg typically get paid on a square foot basis.

So, I think the dynamics in terms of growth of the end customer, the number of yachts
continue to be positive and we’d expect that to filter through into new build and
refit markets.

 

**Q3: Has this affected your forecasts in any way?**

**A3**: No, we’ve maintained our forecasts for 2018 for now, they’ve seen some growth
in the order book and we do believe the business is well positioned in the industry
as well as a leading player and global player in this niche market, but we’ve kept
the forecasts unchanged for now.

 

**Q4: In terms of company valuation, what are the key things that we should be looking
at?**

**A4**: GYG shares have de-rated slightly of late, I think if you look at the valuation
on December 2018 basis, it’s trading on a PE of just below 10 times, EV/EBITDA of
6 times and there’s a dividend yield on offer at about 6%. The free cash flow dynamics
of the business are very positive, and we estimate a yield of around 10% there and
it’s an asset light business as well and the returns on capital are approaching 
30% so to my mind, it’s a very good asset light niche business.

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