Mothercare & Michael Kors steal the show

Mothercare and Michael Kors stole the show on Tuesday. While the motherhood retailer’s shares are living a boom after last news on potential acquisition of the firm, the American label is lifting hopes in Hong Kong with its IPO plans.

Ben Hunt, analyst at Oriel Securities, has placed a ‘buy’ on Mothercare following reports that Cinven, a private equity house, is considering a £150 million cash offer for the business. Although the company has yet to approach the board, it’s understood to be examining how a takeover could be carried out. Montagu Private Equity and CVC have also reportedly been looking at Mothercare. Hunt said: ‘We believe the highly cash generative international business, which is growing earnings at +20%, can be valued on at least 12x forward price-to-earnings-ratio. Given that the average lease lengths for the unprofitable Early Learning Centre high street stores are just three years, we believe it is possible to quantify the losses the UK business is likely to make. On our conservative assumptions, it would cost just £100 million in cash if Mothercare’s UK business was run until its leases expired.’

The retailer’s shares have tumbled to lose 72% of their value so far this year, and were trading at 169p on Monday afternoon. Hunt added: ‘Trading is likely to remain volatile until a new CEO is installed and the strategic review of Mothercare’s UK estate is implemented. However, we believe that there is substantial upside to Mothercare’s intrinsic value that will have to be recognised by the market at some point.’

Elsewhere, LVMH shares, which have lost 7 percent since Jan. 1, closed down 2.71 percent at 111.35 euros. In London, Burberry Group (BRBY) 1,189.00p closed lower (-2.30%) and Next waved bye a flat session.

Finally, a total of 12 IPOs are planned for the week of Dec. 12, and collectively they are expected to raise $3.8 billion. Fashion industry contribution would be on the behalf of Michael Kors, said also going public and is hoping to raise near $800 million.