In today’s daily we have covered stock research on JB Hi-Fi (HOLD).
The S&P 500 was up by 4.87 points or 0.24% on Friday and closed at 2061.02 points. U.S. stocks rose modestly on Friday after late news of merger talks in the semiconductor space boosted the technology sector and helped major indexes snap a four-day losing streak. The Wall Street Journal reported chipmaker Intel Corp is in talks to buy rival Altera Corp citing people familiar with the matter, sending the PHLX semiconductor index up 2.8 percent. Intel shares jumped 6.4 percent to $32 as the biggest boost to the Dow, S&P 500 and Nasdaq 100 indexes. Altera shares surged 28.4 percent to $44.39.
Equity markets were largely unfazed by Fed Chair Janet Yellen's comments at a monetary policy conference in San Francisco. She said the U.S. Federal Reserve is giving "serious consideration" to beginning to reduce its accommodative monetary policy and a rate hike may be warranted later this year, although a downturn in core inflation or wage growth could force it to hold off. The Dow Jones industrial average rose 34.43 points, or 0.19 percent, to 17,712.66, the S&P 500 gained 4.87 points, or 0.24 percent, to 2,061.02 and the Nasdaq Composite added 27.86 points, or 0.57 percent, to 4,891.22. Healthcare also helped buoy indexes as biotech stocks bounced 1.9 percent higher after suffering a 7-percent drop in the prior four sessions, while energy was the worst performing S&P sector as crude prices resumed their decline. U.S. consumer sentiment fell month-over-month in March, a survey released on Friday showed, though the decline was smaller than forecast.
Intel Daily Chart (Source - Thomson Reuters)
S&P ASX 200 was up by 40.80 points or 0.69% on Friday and closed at 5919.9 points. The big banks provided strong support on Friday but were generally lower for the week. CBAwas 2.1 per cent down to $94.34, NAB traded 1.4 per cent down at $38.83, Westpac fell 1.3 per cent to $39.20, while ANZ Banking Group was flat at $36.80. Bank of Queensland traded 7.1 per cent lower to $13.54 over the five sessions after a poorly received earnings update on Thursday. G8 Education gained 0.3 per cent for the week to $3.62, a change after being heavily sold during the past six weeks on fears about the roll-up's balance sheet and its ability to fund future acquisitions.
A big winner for the week was out-of-favour Woolworths, which closed 1.8 per cent up for the week at $29.62. Rival Wesfarmers closed 0.3 per cent down. Among gold stocks for the week, Newcrest gained 5.4 per cent to $13.65 and Regis soared 7.6 per cent to $1.35, but Northern Star lost 2.5 per cent to $2.32. Among other stocks, Metcash lost 3 per cent for the week after staff changes at the grocery wholesaler. Metcash chief executive of supermarkets Fergus Collins will depart the role. An appointment has not been named; until then Metcash chief executive Ian Morrice will "take on the day-to-day running of the supermarkets business", Metcash told the Australian Securities Exchange.
G8 Daily Chart (Source – Thomson Reuters)
Top Performers on the ASX 200 were :-
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Stock Of The Day - JB Hi Fi(HOLD)
For the half-year ended 31 December 2014, the company reported net profit after tax of $ 88.5 million (previous year $ 90.3 million) on sales of $ 1.97 billion (previous year $ 1.94 billion). The cost of doing business was 14.2% (previously year 13.9%) producing an EBIT of $ 130 million (previous year $ 132.9 million) and the EBIT margin was 6.6% compared to 6.8% in the previous half year. Richard Murray, the CEO, said that he was pleased with the result given the difficult trading conditions. The key Christmas period can be considered satisfactory with the company continue to demonstrate its price leadership while keeping costs under control.
Financial Highlights (Source - Company Reports)
Sales continued to improve through the half-year with comparable sales registering a growth of 1.3% in the second quarter. In Australia, total sales for the period rose by 1.4% to $ 1.86 billion to comparable sales were down by 0.6%. Sales of hardware and services grew by 4.7% as did comparable sales by 2.5% despite the decline in the tablet category especially in the first quarter. In New Zealand, total sales declined by 4.3% to NZ$ 103 million as did comparable sales by 6.4% because of the cycling digital switchover.
Cost of Doing Business (Source - Company Reports)
Consolidated gross margin grew by 1.8% to 21.7% or $ 427.3 million. The increase in Australia was 9 basis points to 21.9% because of a better sales mix and in New Zealand was 45 basis points to 18% because of favourable purchasing conditions. The markets in both countries will continue to remain competitive during the second half of the year.
JBH Dividends (Source - Company Reports)
The consolidated cost of doing business (CODB) grew by 29 basis points to 14.2%. In Australia, the increase was 28 basis points to 14.1% because of a reduction in operating level with because of the reduction in operating leverage but operating costs continue to be confined to company expectations. In New Zealand, CODB was up by 53 basis points to 14.8%. The company continues to expect to keep the figure at the current low levels by controlling indirect expenditure and minimising the incidence of indirect expenditure.
EBIT Margin (Source - Company Reports)
On the earnings side, EBIT declined by 2.2% to $ 130 million and EBIT margin by 24 basis points to 6.6%. Low levels of debt and better working capital management saw a reduction of $ 1 million in net interest expense and the company expects the savings in the second half to match the first half. NPAT declined 1.9% to $ 88.5 million and EPS declined by 1.2% to 89.4 cents per share. The effective tax rate was 30.3% and the effective tax rate for the full year is expected to be around 30.5%.
Historical EPS Numbers (Source - Company Reports)
The company regularly reviews its capital structure in detail to ensure that shareholders are rewarded with the maximum possible return. During the half year, on market buybacks of 0.3 million ordinary shares at a cost of $ 5 million was executed to offset the dilutions caused by the share option plans for employees. Because of the increase in the dividend payout ratio from 60% to 65%, the interim dividend was raised 7.3% to 59 cps and the board believes that the payout ratio of 65% is the appropriate balance between rewarding shareholders and reinvesting profits.
Store Locations (Source - Company Reports)
The sales update for January 2015 is total consolidated sales growth of 8.9% and comparable sales growth of 7%. The January 2015 YTD growth was 2.2% for total consolidated sales and 0.2% for comparable sales. January sales and earnings figures are better than the same period in the previous year and YTD comparable sales growth has turned positive. The company expects this momentum to continue through the second half of the year and forecasts total sales for FY 2015 to be around $ 3.6 billion and NPAT to be in the range of $ 127 million and $ 131 million.
JBH Gross Margin (Source - Company Reports)
JB Hi-Fi has performed satisfactorily in a tough retail environment and has grown annual earnings per share (EPS) in 9 of the past 10 years. EPS has increased from 19.8 cents per share to 126.9 cps, or an annual average of about 23%. The company currently offers a fully franked yield of around 4.8% which is attractive and the 65% dividend payout ratio suggests that there may be room for further dividend increases in the future. We believe that the declines in some of the half-year 2015 metrics are modest and should cause no concern to the investor.
JBH Daily Chart (Source - Thomson Reuters)
JB Hi-Fi Home continues to remain a key growth focus for the company highlighted by the opening of three new Home stores and the conversion of 14 JB Hi-Fi stores in Australia to JB Hi-Fi Home during the half. Management expects to open two new Home stores in the second half of fiscal 2015, one in Australia and one in New Zealand, as it takes its JB Hi-Fi Home concept to New Zealand for the first time. We were however, disappointed with management’s revision of the incremental sales per annum target for JB Hi-Fi Home from the previous guidance of AUD 5 million per annum within a couple of years, to between 3 and 5 years instead. We view the Home strategy as an attractive investment for the company; particularly as JB Hi-Fi converts the space allocated to underperforming categories such as CDs/DVDs into Home categories such as cooking and small appliances.While we expect gross margins to be impacted as the resultof this initially, in the medium term we expect margins to improve. We put a HOLD recommendation on the stock at the current price of $18.46.
Level 13 167 Macquarie Street
Sydney NSW 2000 Australia
E-Mail - [email protected]
Phone - 02 8667 3147
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