3 Retail Sector Stocks – MYR, SUL and RFG

Stocks’ Details
 

Myer Holdings Limited

Renewed Focus on Product, Price and Customer Services: Myer Holdings Limited’s (ASX: MYR) stock was lifted up by 7.25% on April 06, 2018 after a speculation on takeover by David Jones was noted to be doing the rounds in the market. Myer Holdings had reported net loss (post-implementation costs and individually significant items) of $476.2 Mn for 26 weeks to 27 January 2018. Revenue from ordinary activities were $1,719.7 Mn, down 3.6% from last year. EBITDA margin dipped by 167 bps to 6.30% in 1HFY18 from 7.97% in 1HFY17 due to impact of lower sales. Basic EPS was recorded at (58.0) cents per share compared to 7.7 cents last year. On the other hand, cash conversion performance improved and was reported to 188% in 1HFY18 from 153% in 1HFY17. This cash conversion ratio improved due to low inventory level during the same period. Net debt at the end of the period was $27.9 Mn higher than last year resulting in a net debt position of $19.9 Mn. To improve the performance in all store, the management aims to focus on direct marketing and visual merchandising towards existing and new product line. The first half result was unsatisfactory which includes the lucrative Christmas and poor January sales trading period. However, MYR aims to revamp its overall growth on the back of improving customer services, focus on product portfolio and competitive pricing factor. The stock has fallen 54.6% in the past six months and is further down by 6.76% in last five days as on April 05, 2018. While any offer from David Jones may be quite a beneficial one for Myer, it will be key to see the next steps from its major shareholder, Premier Investments Limited (ASX: PMV). We maintain our “Hold” recommendation on the stock at the current market price of $ 0.370.
 

Super Retail Group Limited

Completion of Macpac Acquisition: Super Retail Group Limited’s (ASX: SUL) stock was up 2.1% on April 06, 2018, after the announcement that the group has completed acquisition process for hiking goods retailer, Macpac Holdings Pty Limited. This acquisition has been fully funded from the Group’s debt facilities. The group updated that Macpac has continued to trade in line with expectation. As a result of this, Macpac’s provisional and unaudited management accounts for the year to 31 March 2018 reported sales of NZ$97.3 Mn and EBITDA of NZ$17.2 Mn. This is consistent with the SUL’s estimated pro-forma EBITDA of NZ$16m after normalisations and pro forma cost adjustments. Total and like for like sales growth in full year would be 21.2% and 8.6%, respectively. Following the acquisition, the Group has completed the trial of the Rays business and will integrate its profitable stores into the Macpac business over the coming 12 months.Further, Rays and Macpac are to be consolidated under the Macpac brand. Recently, Yarra Funds Management Limited and other related groups, a substantial holder of Super Retail Group Limited changed the holding from 7.7372% of interest to 8.8090%. Besides this, SUL disclosed to the market that one of its director Peter Dobie Everingham who has an indirect interest in the Company, has acquired 10,000 shares for a consideration of $67,590. Meanwhile, the stock price declined by 16.35% in the past six months but edged up 0.15% in the past five days. Based on the ongoing developments, we give a “Hold” recommendation on the stock at the current market price of $ 6.84.


Australian Outdoor Market (Source: Company Reports)
 

Retail Food Group Limited

Challenging trading conditions: Embattled group, Retail Food Group Limited’s (ASX: RFG) stock was down 3.8% on April 06, 2018 post gaining some momentum a day before. The recent sinusoidal movement seems to be coming at the back of short selling and concerns over the long-term prospects of the group. The group has been under immense pressure with many of its franchisees and shareholders going for class action against the company. Meanwhile, RFG posted revenue of $195.5 Mn in 1HFY18 against $161.9 Mn in 1HFY17, marking a growth of 20.8% on Year on Year (YoY) basis. However, Underlying EBITDA stood at $45.7 Mn in 1HFY18, down 24.5% YoY. Underlying NPAT came at $24.7 Mn in 1HFY18, down 31.8% on the prior corresponding period, reflecting disappointing performance in challenging trading condition. During the period, the management informed that RFG will be closing between 160 and 200 Australian outlets by the end of FY19 due to heavy rents and declining shopping centre performance in the regions. The group had notified about non-cash impairments and write-downs of $138 million for the half year and this included Michel’s Patisserie ($45 million), Pizza Capers ($4.5 million) and Coffee Retail Division ($34.5 million). The group’ net debt as at 31 December 2017 was recorded at $259.7 Mn. Recently, UBS Group AG and its related bodies corporate became substantial holder of the group with 5.06% voting power, just few days after ceasing to be the substantial holder. Given the prevailing softness, we maintain a “Hold” at the current market price of $ 0.895.
 

Division-Wise EBITDA Performance (Source: Company Reports)  

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.