Accent Group Limited

Strong PAT growth Y-O-Y: Accent Group Limited (ASX: AX1) is into retail and distribution of footwear and apparel businesses. The company operates in several reputed brands including Platypus Shoes, Podium Sports, Skechers, etc.


Financial Performance FY18 (Source: Company Report)

On the financial front, the company reported its revenue for FY18 at $703.18 million as compared to $636.15 million in FY17, up by ~10.5% Y-O-Y, primarily driven by sale to customers. Among the key ratios, the ROE improved by 290 bps Y-O-Y to 11.6% in FY18 compared to 8.7% in FY17 and the Pre-Tax ROA stood at 9.9% in FY18 compared to 7.7% in FY17, up by 220 bps Y-O-Y.

What to Expect from AX1 Moving Forward: The company targets to achieve a mid-single digit EBITDA growth in FY19.It expects to achieve the EBITDA growth through low single digit Like-For-Like store growth, continued strong growth in the online segment, new stores, stores annualising from FY18, continued margin improvement through vertical and emerging brands and reduced discounting.

Moreover, in FY19, the company intends to continue its strategy of avoiding lazy, discount-driven retailing, and instead drive profitable, sustainable sales and margin growth through a world-class omnichannel offering.

Meanwhile, the share price has risen 6.53% in the past three months as at 6 February 2019 and is trading slightly towards the higher level. The company has ~541.24 million shares outstanding with the market cap of circa $706.32 million and a beta of 0.91x (5-Years, Monthly). It is trading at reasonable PE multiple of 15.860x. By considering decent fundamentals and current trading scenario, we maintain our “Hold” recommendation on the stock at the current market price of 1.310 per share.
 

 Rural Funds Group

Improved AFFO per unit Y-O-Y: Rural Funds Group (ASX: RFF) is a listed real estate investment trust and is managed by Rural Funds Management Limited. The company stated that it garners revenues with the help of long-term lease rentals throughout the 5 sectors namely: poultry infrastructure, tree nut orchards, vineyards cotton as well as cattle assets. 

The company has recently announced to have contracted to acquire ‘Cobungra’, a 6,486-hectare cattle property located in Victoria. The company will fund the purchase price of $35.0 million from its debt facility.

Financial Results for FY18 (Source: Company Report)

On the financial front, the property revenue and AFFO are higher for the period on the back of additional lease income from acquisitions, development capital expenditure and indexation.The property revenue stood at $51.08 million in FY18 compared to $41.57 million in FY17, up by 22.9% approximately. However, the AFFO stood at $32.32 million in FY18 compared to its previous corresponding period of $25.59 million. The operating margin of the company stood at 79.7% in FY18 compared to 76.3% in FY17, up by 340 bps Y-o-Y.

What to Expect from RFF Moving Forward: Going forward, the strategy of the company is to generate stable income and capital growth by owning, and where appropriate, improving the productivity of farms.Additionally, the company targets to grow the adjusted funds from operations per unit through lease indexation, reinvestment of retained AFFO, and market rent review mechanisms. RFM will continue to pursue additional acquisitions funded through balance sheet capacity.

Meanwhile, the share price has risen 14.14% in the past six months as of 7 February 2019 and is trading close to higher level with PE multiple of 15.71x. Driven by the short-term stock performance coupled with improving property revenue and AFFO YoY, we reiterate our “Hold” recommendation on the stock at the current market price of $2.220 per share.
 

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