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Mid-Cap

FOUR CONSUMER DISCRETIONARY STOCKS WITH DIVIDENDS

October 14, 2015 | Team Kalkine
FOUR CONSUMER DISCRETIONARY STOCKS WITH DIVIDENDS

Coca-Cola Amatil



Eyeing Indonesia market to offset domestic pressure: Coca-Cola Amatil Ltd (ASX: CCL) shares fell 15.5% in the last six months partly due to shifting consumer preference towards healthy options and growth concerns. On the other hand, CCL is targeting the booming Indonesia market with rising consumer purchasing power. Accordingly, CCL’s parent company, The Coca Cola Company invested USD 500 million into the Indonesia market by acquiring a 29.4% equity interest in CCA Indonesia. Although, CCL is still depended on Coke for most of its revenues, the group is diversifying into alternate options like iced coffee and water. The group managed to report a decent growth in terms of trading revenue of 4.9% on a year over year basis to $2.4 billion for the first half of 2015, as Australian business volumes improved at the back of CCL investments on pricing to regain its competition in the market. Accordingly, CCL shares rose over 6.88% in just last four weeks, and we believe the stock to recover further in the coming months. Speculations about SABMiller interested in acquiring CCL are not yet confirmed as market expects that this may be a strategy to help SABMiller protect itself from being acquired by Anheuser-Busch InBev. With a high dividend yield of 4.59%, we reiterate our “BUY” recommendation on CCL at the current price of $9.18.


CCL Daily Chart (Source: Thomson Reuters)
 

Woolworths Limited 



Launched Australian Supermarket Customer first Strategy to drive growth: Woolworths Limited (ASX: WOW) business continued to witness pressure wherein its sales fell 0.2% yoy to $60.679 billion impacted by the group’s Australian Food, liquor and petrol as well as General Merchandise segments. Therefore, WOW launched an Australian Supermarket Customer first Strategy to revive its business across all the segments, and sustain market competition. The group invested over $200 million on price during the second half of FY15, and estimates to do the same in the first half of FY16. Accordingly, over 9,000 items from WOW were cheaper as compared to its major competitor Coles during fourth quarter of 2015, as per Nielsen Homescan reports. The company has always tried to be loyal to its customers by providing sufficient and accurate information about its products. The latest example entails the recall of 12 ice cream and sorbet products that have potentially been produced in packaging with inconsistent peanut allergen labelling.

 
Segment Performance (Source: Company reports)

Woolworths has a strong dividend yield of 5.18%. As the stock fell over 13.1% during this year to date, it is trading at a cheaper valuation with P/E at 15.7x. We reiterate our “BUY” recommendation on WOW at current price of $26.63.


WOW Daily Chart (Source: Thomson Reuters)
 

Super Retail Group


 
Investing on future growth: Super Retail Group Ltd (ASX: SUL) delivered a sales increase by 7.1% yoy to $2.24 billion in fiscal year of 2015, driven by like for like sales improvement across its Auto and Sports division. Moreover, the group is investing over $90 million for its potential business by opening new stores, developing multi-channel business capabilities as well as refurbishing its existing stores. SUL’s cost of doing business ratio improved given the lower LFL sales and multi-channel and group projects. SUL is enhancing its pricing competitiveness to sustain the competition pressure and intends to decrease its inventory levels in the coming months.
 

Financial Performance over the years (Source: Company Reports)

Meanwhile, Super Retail’s auto retailing witnessed a like for like revenue increase of 2.5% during the first seven weeks of the fiscal year of 2016, while the Gross margin remained on track. The group surged over 22.66% during this year to date. SUL has a dividend yield of 4.62%, and we place a “BUY” recommendation on SUL at the current price of $8.77.


SUL Daily Chart (Source: Thomson Reuters)
 

Dick Smith


 
Drive growth via expanding stores: Dick Smith Holdings Ltd (ASX: DSH) shares plunged over 27.8% in the last three months, partly impacted by its lower than estimated fiscal year of 2015 performance. On the other hand, DSH reported a decent increase of total sales by 7.5% yoy to $1,319.7 million during the period. Gross profit surged by 6.1% yoy while gross margin reached 24.8% during the period. Dick smith is also aggressively expanding its consumer electronics network and opened 14 stores in second half of 2015 reaching a total of over 393 located stores in Australia & NZ. DSH intends to expand its network to 420-430 stores by FY2017, by opening over 15 to 20 new stores annually. DSH is continuing to enhance profits through a store rollout option, particularly, the Move branded store network. Dick Smith also doubled its online sales during FY2015, contributing over 8% of retail sales. The group’s private labels penetrated more than 12.5% of sales and accordingly DSH improved product range by 40% to address consumer needs. The group intends to launch small Appliances in over 100 stores during first half of 2016.


Expanding store network (Source: Company Reports)

DSH offers a solid bargain opportunity as it is trading at a relatively cheaper P/E of 9.2x and has an outstanding dividend yield of 8.11%. Accordingly, we give a “BUY” recommendation on DSH at the current price of $1.455.


DSH Daily Chart (Source: Thomson Reuters)

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The information given by Kalkine Pty Ltd ABN34 154 808 312 (Australian Financial Services License Number 425376) on this website is general information or advice only.

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