Buy, Hold, Expensive: 3 Mid-cap Stocks - FLT, PMV, JBH

Stock’s Details

Flight Centre Travel Group Limited

Decent Growth in TTV:Flight Centre Travel Group Limited (ASX: FLT) is involved in travel retailing in leisure and corporate travel sectors, plus in-destination travel experience including tour operators, hotel management, destination management companies and wholesaling. Recently, the company announced that John Eales has made a change to his holdings in the company by acquiring 2,000 fully paid ordinary shares at the consideration of $79,571.95 on 11^th November 2019. At 2019 Annual General Meeting, the Chairman of the company addressed the shareholders and stated that FLT has delivered record sales during the 12 months to 30^th June 2019, with a rise of 8.8% to $23.7 billion in total transaction value (TTV). TTV growth was achieved with fewer sales staff pointing to further productivity gains, driven by its growth in various businesses and channels, including leisure online and managed corporate travel, which are heavily automated. The following picture provides an overview of key metrics for the period:

 
Key Metrics (Source: Company Reports)

What to Expect:The company expects underlying PBT for the six months to 31^st December 2019 to be in the range of $90 million - $110 million. It added that YoY profit growth is anticipated during the 2H, which is traditionally a seasonally busier trading period, and it would target an underlying PBT in the ambit of $310 million - $350 million for the full year 2020.

Stock Recommendation:The company added that, in corporate travel globally, it has started FY 2020 strongly and has developed foundations for another good year. On the valuation front, FLT’s stock has EV to sales multiple of 0.9x against the industry median of 1.2x on TTM basis. In addition, it has EV to EBITDA multiple of 6.7x in comparison to the industry median of 7.4x on TTM basis. Therefore, in light of the strength of its brands and geographic diversity, continuing value of its offerings to customers, resilience across the economic cycle as well as ability to identify and capitalise on new trends and opportunities, we give a “Buy” recommendation on the stock at the current market price of A$40.710 per share, up 2.235% on 13^th November 2019.
 

Premier Investments Limited

Annual General Meeting to be held on 29 November 2019:Premier Investments Limited (ASX: PMV) operates several specialty retail fashion chains within the specialty retail fashion markets in Australia, New Zealand, Asia and Europe. The market capitalisation of the company stood at ~A$3.07 Bn as on 13^th November 2019. The company has issued 44,579 ordinary shares on 28^th October 2019. There were issued as a result of vesting of performance rights issued under the company’s performance rights plan. PMV has planned to conduct its 2019 Annual General Meeting on 29^th November 2019. The below picture depicts an overview of the consolidated income statement:


Consolidated Income Statement (Source: Company Reports)

Future Guidance:Smiggle announced its Accelerated Global Growth Strategy in September 2018, recognising the changing nature of global retail. It added that Smiggle has now launched its new wholesale channel in seven new countries and in 180 doors. The wholesale orders taken todate(with the release on 20^th September 2019) have the potential to deliver in the range of A$35 million and $45 million in retail sales to consumers in 1H FY20.

Stock Recommendation:Net margin of PMV stood at 8.4% in FY19 as compared to the industry median of 3.4%. This implies that the company has better capabilities to convert its top-line into the bottom-line in comparison to the broader industry. Current ratio stood at 2.80x in FY19 against the industry median of 1.26x, which represents that PMV is in a decent position to address its short-term obligations against the peer group. On the stock’s performance front, it delivered returns of 29.87% and 16.64% in the last three months and six months, respectively.

Thus, considering decent outlook, respectable key margins, CAGR growth of 7.41% in total revenue over the period of FY15 to FY19, and decline of 109 basis points in CODB in FY19 in Premier Retail, we maintain our “Hold” rating on the stock at the current market price of A$19.840 per share, up 2.532% on 13^th November 2019.
 

JB Hi-Fi Limited

Chairman’s Address to Shareholders:JB Hi-Fi Limited (ASX: JBH) is a specialty retailer of home consumer products with a focus on consumer electronics, software, whitegoods and appliances. The market capitalisation of the company stood at ~A$4.15 Bn as on 13th November 2019. Recently, the company announced that UBS Group AG and its related bodies corporate has become an initial substantial holder in the company with the voting power of 5.05% on 7^th November 2019. The Chairman of the company stated that FY19 has been another record year for JB Hi-Fi Limited and its subsidiaries with sales, profits and dividends all up against prior year. The 2019 result was driven by a combination of sales growth and its low cost of doing business, supported by its ongoing emphasis on customer service. When it comes to the performance of Q1 FY20, total sales growth for JB HI-FI Australia was 4.7%, with comparable sales growth of 3.7%.


Group Performance for FY19 (Source: Company Reports)

What to Expect:The Company reiterated its previously announced FY20 guidance of total sales of around $7.25 billion out of which $4.84 billion is expected to come from JB HI-FI Australia, (NZD) $0.24 billion is expected to be contributed by JB HI-FI New Zealand and $2.18 billion is anticipated to come from The Good Guys.

Stock Recommendation:On the valuation front, JBH has EV to EBITDA multiple of 10.4x in comparison to the industry median of 8.1x on TTM basis. The stock of JBH is trading at a price to earnings multiple of 16.63x against the industry median of 12.2x on TTM basis. Thus, it can be said that the stock of JBH is overvalued at current trading levels. JBH witnessed a rise of 42.32% in the span of six months and 67.36% on YTD basis. The stock of JBH is trading close to its 52-week high of A$37.730 per share. Therefore, considering the valuation metrics and current trading levels, we give an “Expensive” rating on the stock at the current market price of A$36.240 per share, up 0.249% on 13^th November 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.