March 31, 2017 / 11:18 AM / 10 months ago

BUZZ-View from the Buyside-Henderson backs Pets at Home even as hedge funds pounce

** Pets at Home still seen by some fund managers as a play on people’s unfailing willingness to spend money on their pets, even as short interest in the stock hits all-time highs

** David Smith, who runs Henderson High Income Trust, started buying Pets at Home end-2016, has added to holdings this year

** Stock second-worst YTD performer on FTSE 250, -24% after disappointing Q3, but short interest continues to rise

** Bear case surrounds pricing - co may need to do more to compete with online players like Germany’s Zooplus

** Smith says co has acknowledged online players are more competitive, has cut own label prices and now necessary to wait and see how that response translates into volumes

** PM highlights co clear market leader on retail side, sells 50% of all pet products in UK

** He likes services side of biz (includes veterinary practices and dog & cat grooming) which is underdeveloped in a sector growing quite rapidly over next 5-10 yrs

** PM flags good visibility over earnings growth coming through longer term (e.g. opening 50-60 grooming salons in the year), meantime dividend yield 4.1%, expects special dividend

** PM highlights co’s click and collect, “holy grail” of online retailing whereby customers can choose to shop when in store picking up products

** Schroders’ Andy Brough also holds stock (RM:

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