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Applegreen profit is ripe for picking
APPLEGREEN (APGN:AIM) 365p
Gain to date: 14.1%
Original entry point: Buy at 320p, 4 June 2020
Our ‘buy’ call on roadside convenience retailer Applegreen (APGN:AIM) has generated a rapid-fire return, with the shares speeding as high as 380p on 8 June.
Though they’ve settled back to 365p, eagle-eyed investors who spotted the surge will have been able to lock-in the 15% profit we targeted once the shares hit 368p. Anyone else could still at the time of writing take a very respectable 14.1% profit off the table on this short-term trade.
We identified that shares in the Applegreen brand owner, which also has a majority stake in motorway service operator Welcome Break, had positive momentum at their heels.
Investors have begun to price in a recovery of fuel volumes and food and drink sales as measures to come out of lockdown drive a gradual increase in road usage. We also suggested that if consumers are unable to travel overseas for summer holidays, then Applegreen might also benefit from a staycation boom.
Applegreen is a high-quality, cash-generative concern, but it also has a large net debt position – €545m as at 20 March – which means the investment comes with risk, although management insist the business has enough cash resources to trade through a downside scenario where the recovery period is more prolonged into 2021.
SHARES SAYS: Shares in Applegreen recently motored past our 368p target return price and we think risk-averse investors should take profit and move on.