Universal Store Holdings Limited

UNI Details

Financial Highlights of 1HFY22 (ended 31 December 2021): Universal Store Holdings Limited (ASX: UNI) is a fashion retailing firm selling apparel, footwear, and accessories for women and men in Australia.

• Gross profit margin (excluding online delivery costs) increased to ~60.3% in 1HFY22 from ~59.7% in 1HFY21, up by ~0.6% despite mandated store closures in Victoria, New South Wales (NSW), etc. in Q1FY22.
• The company generated an underlying cashflow of ~$44.5 million from operations, depicting an operating cash flow conversion of ~140%.

Trend of Continuous Expansion in Physical Stores; (Analysis by Kalkine Group)

Key Risks:  UNI faces the risk of COVID-19 led store closures in Australia, changes in customer’s income levels, higher capex for expansion plans, and margin expansion as it grows further.

Expect What?

UNI plans to add three new stores in the next six months and advance on shifting to a new office and distribution centre (DC). The new DC facility will be operational in early 1HFY23 and offer capacity and flexibility to aid the long-term business growth.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of UNI gave a negative return of ~16.47% in the past three months and a negative return of 30.13% in the past six months. The stock is currently trading below its 52-weeks’ average price level band of $5.180 - $8.560. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median P/E multiple, considering its high-debt-to-equity-ratio, a decline in key metrics in 1HFY22, and the COVID-19 risks due to government mandated store closures. For this purpose of valuation, a few peers like Accent Group Ltd (ASX: AX1), City Chic Collective Ltd (ASX: CCX), and Premier Investments Ltd (ASX: PMV) have been considered. Considering the current trading levels, like-for-like (LFL) sales growth, higher online sales contribution, store growth, and geographical expansion, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $5.680, as of 21 April 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

UNI Daily Technical Chart, Data Source: REFINITIV 

Cettire Limited

CTT Details

Delivered Key Metrics Growth in 1HFY22 (ended 31 December 2021): Cettire Limited (ASX: CTT) markets in-demand personal luxury brands for footwear, apparel, bags, and accessories through cettire.com.

• CTT reported ~46% of gross revenue from repeat customers in 1HFY22 versus ~34% posted in 1HFY21.
• Website traffic increased from ~5.8 million in 1HFY21 to ~23.6 million in 1HFY22, up by a whopping ~304% Y-o-Y.

Rise in Key Metrics, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of launching new product categories, raising adequate funds for expansion, technological changes, and weak consumer demand.  

Outlook: CTT continues to drive investments for brand building and expansion of market share in the growing personal luxury products market. Due to online channel growth and a rising millennial population, the market for personal luxury products is expected to grow. CTT plans to launch a mobile app to maximise transaction flow, roll out a new beauty category, and expand in new geographies.

Stock Recommendation: The stock of CTT gave a negative return of ~73.37% in the past three months and a negative return of ~72.87% in the past six months. The stock is currently trading close to its 52-weeks’ low level of $0.850. On a TTM basis, the stock of CTT is trading at an EV to sales value multiple of ~1.8x, lower than the industry (Specialty Retailers) average of ~2.2x, thus seems undervalued. Considering the current trading levels, growth in revenue, active customers, plans to expand in new markets, launch of new product categories, valuation on a TTM basis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.860, down by ~4.445%, as of 21 April 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

CTT Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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