Myer Holdings Ltd

Sloppy sales performance in recent weeks: Myer Holdings Ltd.’s (ASX: MYR) Q2 FY18 year to date sales and profit as at December 14, 2017 have been slipping post the Q1 FY18 subdued scenario that witnessed total sales down by 2.8% and comparable store sales down by 2.1%, compared to the previous corresponding period. Therefore, the recent trading environment is expected to result in a profit shortfall, which is unlikely to be recovered in the remainder of the first half. MYR expects 1H 2018 NPAT (pre-implementation costs and individually significant items) to be materially below the previous corresponding period. As a result, MYR stock has fallen 10.88% in three months as on January 11, 2018. However, MYR has posted strong performance in the online business, with the sales growth of 62% in the first four months. Though it is not yet of sufficient scale to compensate for the subdued performance of some stores, the group is ready to put in efforts on different fronts to manage the shortcomings. Additionally, New Myer strategy is a five-year turnaround strategy and the company remains focused on the long-term transformation that will further strengthen the business to compete. We have a wait and watch approach on this retailer as we give a “Hold” recommendation on the stock at the current price of $0.655
 

Sigma Healthcare Ltd

Debt to rise: Sigma Healthcare Ltd (ASX: SIG) for FY18 expects the underlying EBIT of $90 million. In 1H 2018, the company’s net debt stands at $72.8 million, which is expected to reach $125 million at year end (subject to any additional acquisitions), due to the investment in major infrastructure, continuation of the share buy-back program, and the dividend payments. Moreover, in 1H 2018, the underlying EBIT was down 8.7% as the company faced a number of challenges, which have impacted its current half year underlying performance. The group also faces an earnings impact as Astra Zeneca has announced to establish exclusive distribution channel directly to pharmacy bypassing the channel through SIG. The stock that rose 4.17% in three months as on January 11, 2018, fell about 12.5% in last five days as the limitations cannot be overlooked now. We give an “Expensive” recommendation on the stock at the current price of $0.89
 

1H 18 Financial Performance (Source: Company Reports)

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