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Jan 20 2023, 06:50 GMT
MusicMagpie’s (MMAG) rental proposition delivers c.78% gross margins and is clearly compelling, particularly through a cost-of-living crisis, as it offers a lower-cost alternative for consumers. That said, sourcing devices is expensive – certainly to drive any meaningful growth – and we expect MMAG to max out its £20m RCF by November 2024. Cash constraints and the focus on rental will result in slower growth across the rest of the business; we therefore move down our numbers. There is a valuation downside if the rental capex requirements rise; we revise our price target to 35p.