JB Hi-Fi Limited (ASX: JBH)

Maintaining decent performance while competition prevails: Given the prevailing competition in the sector, JBH has been facing some challenges lately and the share price has slipped by 9.24per cent in past three months as on April 24, 2018. NPAT for 1HFY18 was up by 21 per cent as compared to 1HFY17 and amounted to $151.7 million.  Earnings per share and Dividend per share for 1HFY18 were up by 13.7%. These strong financials have been influenced by the company’s major acquisition of The Good Guys in November 2016, while JB Hi-Fi’s Australian segment continues to perform despite the recent arrival of Amazon. The Company had a total of 311 stores in Australia and New Zealand as at 31 December 2017. During 1H FY18, seven new JB HI-FI stores were opened in Australia while one JB HI-FI store was closed in New Zealand. Two new The Good Guys stores were opened during first half of the year.


1HFY18 Financial Highlights (Source: Company Reports)
 
Moreover, the Group will focus on sales and on its market share in second half of the year; and as a result, the company anticipates that its total Group sales and NPAT will be approximately circa $6.85 billion and in the range of $235 million to $240 million, respectively. Recently, Ellerston Capital Limited (Primary Person) and its associates, a substantial holder of JBH changed its substantial holding on April 10, 2018, from 9.67 per cent of the voting power to 10.67 per cent of voting power. Based on the volatility at the back of competition, we maintain an “Expensive” recommendation on the stock at the current market price of $ 25.630.
 

Super Retail Group Limited (ASX: SUL)

Significant Opportunity to Grow Further: Super Retail Group Limited is one of Australasia’s Top 10 retailers and is listed in the Australian Stock Exchange. Recently, the Group completed acquisition process with Macpac Holdings Pty Limited for total consideration of NZ$ 144 million. The acquisition has been funded from the existing debt facilities and expected to generate mid-single digit EPS accretion in FY19. 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. The Group updated that Macpac has continued to trade in line with the management expectations.


Performance Trend (Source: Company Reports)

According to the 1HFY18 performance, the Group registered sales growth of 2.2 per cent to $1324.1 million in 1HFY18 on like for like basis. However, Net Profit after tax (NPAT) for the period attributable to the company contracted to $71.5 Mn in 1HFY18 from $73.8 Mn in 1HFY17, down by 3.1%. Further, the Group costs were slightly up to $10.2 million during the half and included corporate costs, unutilised storage space and investment in the Group’s digital initiatives. Recently, SUL disclosed to ASX that Yarra Funds Management Limited and other related groups, a substantial holder of the Group changed the holding from 7.7372% of interest to 8.8090% of the voting power. The stock was down 18.9% in past three months as on April 24, 2018 but has risen 6.2% in last one month. The company has further room for growth and we give a “Hold” recommendation on the stockat the current price of $ 7.190, given the rise in earnings per share, improvement in average net debt and return on capital performance.
 

Stock Prices for JBH and SUL in last three months (Source: Thomson Reuters)

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