Premier Investments Limited (ASX: PMV)

Healthy half year performance: Up 6.1% on March 16, 2018, Premier Investment announced about appointment of Sylvia Falzon as an independent Non-Executive director of the Company who will be effectively taking responsibilities from 16 March 2018. She has been an Independent Non-executive director of ASX listed companies like Regis Healthcare Limited and Perpetual Limited, and holds a Masters in industrial Relations and in Human Resource Management from the University of Western Sydney. On the other hand, PMV’s 1H18 net profit after tax was $78.6 million which was up by 9.4 per cent as compared to 1H17. Sales were up by 7 per cent and amounted to $630.1 million as compared to same period in the prior year; and were driven by Smiggle’s global sales. The interim dividend was 29 cps fully franked which was up by 11.5 per cent as compared to 1H17 and will be paid in May 2018. Investment in its associate (Breville Group Limited) accounted for $221.3 million and the current market value of this investment is $447.4 million. Its capital investment program continued and initiated 331 capital investments across all brands and markets which included 53 new stores. In 1H18, 84.8 per cent of capital investment in Australia and New Zealand stores were funded via landlord contributions. The stock price has been up 5.6% in last one year (as at March 16, 2018), and the same looks “Expensive” at the current market price of $15.27
 

Capital Investment Trend (Source: Company Reports)
 

Wesfarmers Limited (ASX: WES)

Repositioning Wesfarmers & Coles for the next decade: The Group’s surprise announcement on its intention to demerge its Coles division led the stock surge by 6.3% on March 16, 2018. This however, will be subject to shareholders’ and other approvals. It is anticipated that the proposed demerger will create a new top 30 company that will be listed on ASX and will lead in the supermarkets, in liquor and convenience which will have a strong cash generating capability that will underpin the dividend distributions. Post this Wesfarmers portfolio will be reviewed, and its capital employed will be assessed so that it can generate higher levels of future growth and shareholders return. A demerger of Coles will facilitate greater focus by Wesfarmers on its growth opportunities within its remaining businesses. If the demerger will be implemented, Wesfarmers shareholders will receive shares in Coles that will be proportional to the existing Wesfarmers’ holdings. If the proposed demerger proceeds, Wesfarmers’ objective will remain to deliver satisfactory returns to the shareholders over the long term through the active management of its diversified portfolio and through strong financial discipline. It is noteworthy that Coles’ contribution to group’s return on capital is much below Bunnings, Department stores, Officeworks and Industrials. The stock price was otherwise down by 7.6% in the past three months as on March 16, 2018. At the moment, the stock seems to be “Expensive” at the market price of $43.80, and we will keep a watch on further developments and price movement for any potential investment opportunity.
 

Scenario post Demerger (Source: Company Reports)
 
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