Stocks’ Details
 

Bapcor Limited

 
Trade Segment Contributing the Most to Revenue and EBITDA: Bapcor Limited (ASX: BAP) is engaged in the sale and distribution of motor vehicle aftermarket parts and accessories, automotive equipment and services and motor vehicle servicing. It operates in over 940 locations across Australia & New Zealand.
 
Financial Highlights:In an investor presentation at the Morgan Stanley Conference, the company reported details on the segment contribution to revenue and EBITDA during the first half of FY19 and prior corresponding period. For 1HFY19, Trade segment contributed to 51% of the Auto Revenue followed by Specialist Wholesale at 29% and Retail & Service at 20%. The ranking was similar in 1HFY18 with Trade contributing 53% to Auto Revenue followed by 28% from Specialist Wholesale and 19% from Retail & Service. Contribution to Auto EBITDA, during both the periods, was the highest from trade at 58%.
 

Business segment contribution to Revenue and EBITDA (Source: Company Reports)
 
Revenue during the period amounted to $636.1 million, up 3.2% on pcp. EBITDA for 1HFY19 amounted to $76 million, up 8.2% on pcp. Net profit after tax was recorded at $43.1 million, up 6.6% on pcp. Earnings per share increased at a rate of 5.9% to 15.34 cps. Growth in NPAT was impacted by 2.5% due to the divestment of TRS business in July 2018.
 

Key Financial Highlights (Source: Company Reports)

FY19 Guidance:For the full year FY19, BAP has forecasted an increase of circa 9% in NPAT against FY18 proforma NPAT of circa $94.3 million. Full year cash conversion is expected to be greater than 90% and net debt annualised leverage ratio is forecasted around 2 times of earnings.

Stock Recommendation:The stock of the company yielded returns of -3.34% and -8.79% over the period of 1 month and 3 months, respectively. Currently, it is trading at reasonable PE multiple of 15.94x with the market capitalisation of $1.56 billion. The first half of the financial year 2019 reported record results with Bapcor witnessing growth in all the key performance indicators, including revenue, EBITDA, profit, and dividend. FY19 guidance indicates the record full-year result in revenue, earnings, and EPS. Hence, considering the above factors, we give a “Buy” recommendation on the stock at a market price of $5.540 (up 0.727% on 18 June 2019).
 
 

Super Retail Group Ltd

Customer Loyalty Provides Sustainable Advantage:Super Retail Group Ltd (ASX: SUL) is primarily engaged in retailing of auto parts and accessories, outdoor equipment, fishing equipment and apparel, sporting equipment, etc. It has a network of ~688 stores across four brands namely Supercheap, BCF, Macpac and Rebel. The company recently updated a change in substantial shareholding of UBS Group AG and its related bodies corporate with voting power reducing from 6.75% to 5.54%.

Trading Updates for The First 17 Weeks Of 2H19:The company recently provided a trading performance update and outlined the immediate priorities for the Group. The presentation provided a trading update for the first 17 weeks of the second half of FY19 for its reported segments.

For the period of YTD to 27 April 2019, Group Like for like sales was reported at 3.3% with Group’s unallocated cost to be approximately $21 million and capital expenditure of approximately $85 million. Performance of the Auto and Sports business was in-line with the expectations. BCF segment maintained its revenue growth trajectory even after facing an ongoing pressure on the margin front. SRG’s three core brands - Supercheap Auto, Rebel and BCF witnessed strong performance whereas Macpac, an emerging & credible brand is a high growth segment. BCF recorded the highest like for like revenue growth at 5.3% in the first 17 weeks of H2, followed by Supercheap Auto posting a like for like revenue growth of 4.2%.

Sales Growth of SGR (Source: Company Reports)

Outlook: The Management expects that the company will further enhance Omni-retail channels to provide better offerings to the customers and to expand further growth for the overall Group. The company with its strong customer base presents substantial opportunities to capitalise on the potential of SUL’s brands.

Stock Recommendation:The stock of the company yielded returns of 18.95% and 23.14% over a period of 3 months and 6 months, respectively.Currently, it is trading at reasonable PE multiple of 14.060x with the market capitalisation of $1.8 billion. For 1HFY19, the company experienced an EBITDA margin of 11.8% against the industry median of 8.9%. Gross Margin for the period was 44.9%, almost double the industry median of 23.3%. Going Forward, with the extensive store network, sector leading brands, customer loyalty, and increasing e-commerce ability, the company is well positioned for future growth within the retail sector in Australia and New Zealand. Hence, we give a “Buy” recommendation to the stock at a current market price of $9.140 (up 0.44% on 18 June 2019).
 

Myer Holdings Limited

 
Exit and Entry of Brands to Impact the Top-line in 2HFY19: Myer Holdings Limited (ASX: MYR) is primarily engaged in retailing through department stores across Australia and online channels. On 27 May 2019, the company updated about the change in substantial shareholding of Wilson Asset Management Group with increased voting power from 6.69% to 7.76%.
 
Financial Highlights: During 1HFY19 to 26 January 2019, the company reported a decline in total sales by 2.8% and comparable store sales by 2.3%. The sales amounted to $1,671.4 million. Online and omnichannel sales depicted an upward movement of 18.6% to $151.2 million. The same period reported a net profit after tax amounting to $41.3 million due to improved operating gross profit margin and continued disciplined cost management. Operating cash flow during the period amounted to $173 million, reporting an increase of $8 million. The company came out with a net cash position of $37 million.
 

Income Statement for 1HFY19 (Source: Company Reports)
 
The results during 1HFY19 demonstrated a positive customer response due to a number of initiatives in Customer First Plan including improvement across stores and online channels in terms of merchandise range, user experience, store ambience, delivery options, etc. A strengthened leadership team was another factor contributing to the same.
 
Outlook: The company expects the business to focus on costs, profitability and cash management through execution of Customer Focus Plan during 2HFY19. Sales during the period are expected to be impacted by the exit of a few brands and the addition of new brands which will be accompanied by additional costs. Investments in two key areas namely merchandise and online business, is likely to be continued. Few macro challenges like uncertainty in the lead up to the Federal election and concerns around the housing market may impact discretionary spend.
 
Stock Recommendation: The company’s stock yielded positive returns of 45.68% over a period of 6 months and 40.48% on YTD basis. During 1HFY19, the company depicted a decline in total sales along with an uplift in sales through online channels. On the outlook front, it is still expecting a few challenges, which might impact the performance in the second quarter. Looking at the above factors, we give a “Hold” recommendation to the stock at a current market price of $0.570 (down 3.39% on 18 June 2019).


Comparative Price Chart (Source: Thomson Reuters)      

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