Stocks’ Details

G.U.D. Holdings Limited

Key Takeaways from Investor Presentation:G.U.D. Holdings Limited (ASX: GUD) is a distributor of automotive filtration and other service parts, locking systems and other security products. The market capitalisation of the company stood at A$893.02 Mn as on 14^th October 2019. The company has recently published an investor day presentation, wherein it primarily communicated about the highlights of FY 2019. The company stated that it has a robust financial position with a growth of 9% in FY 2019 in revenue from continuing operations as compared to pcp and it experienced solid automotive result in a challenging environment. However, the company’s water business witnessed a modest revenue and EBIT growth in the weak market.

 
Financial Results from Continuing Operations (Source: Company Reports)

What to Expect:With respect to automotive, the company anticipates that challenging trading conditions might persist in the near term, although the planned mitigation actions are in progress. GUD added that the Automotive aftermarket sector happens to be structurally attractive and its brands are well placed to deliver sustainable organic growth over the medium to long term and this might attract the attention of the market players, moving forward. For the Group, the cash conversion is still expected to remain near 80% in FY20.

Stock Recommendation:On the valuation front, the stock of GUD is trading at a price to earnings multiple of 14.950x in comparison to the industry average of 15.51x. EV to EBITDA multiple of the company stood at 10.2x against the industry average (Automobiles and Auto Parts) of 11.4x on NTM (Next Twelve Months) basis. Considering the financial performance in FY19, outlook of the business along with decent valuation, we give a “Buy” recommendation on the stock at the current market price of A$10.490 per share, up 1.845% on 14^th October 2019.

Collins Foods Limited

Refinancing of Facilities:Collins Foods Limited (ASX: CKF) is in the operation, management and administration of restaurants in Australia, Europe and Asia. The market capitalisation of the company stood at A$1.19 Bn as on 14^th October 2019. The company has recently announced that it has issued 267,536 performance rights on 2^nd October 2019. The performance rights have been granted as equity compensation benefit in accordance with Collins Foods Limited executive and employee incentive plan. As per the release dated 26^th September 2019, the company announced that it has entered into binding documentation in order to refinance its existing syndicated debt facilities. The company stated that the existing facilities amounting to $270 Mn and €60 Mn would be refinanced under a new syndicated facility agreement, which comprises $265 Mn and €80 Mn revolving facilities. Out of the new facilities, $210 million and €52 million would be drawn on the financial close with sufficient funding headroom, provided by undrawn amounts. The following picture provides an idea of underlying EBITDA and NPAT for the financial year 2019:


Underlying EBITDA & NPAT (Source: Company Reports)

Future Aspects:As per the annual report 2019, the company stated that, in Europe, it continues to focus on driving improved sales including, the introduction of a brand refresh in Germany and a renewed focus on value in the Netherlands. These initiatives are anticipated to have positive impacts in these respective regions in FY20. It was also mentioned that the Group would maintain its disciplined approach with regards to operational management while continuing to invest in new and innovative products that taste great and customers enjoy.

Stock Recommendation:On the valuation front, the company is trading at a price to cash flow multiple of 12.9x in comparison to the industry median (Consumer Cyclicals) of 8.1x on a TTM basis. As per ASX, CKF is trading at a price to earnings multiple of 30.530x against the industry median (Consumer Cyclicals) of 13.1x. Currently, the stock of CKF is trading close to its 52-week high of $10.600. The stock has gained 70.55% on YTD basis. Considering the aforesaid facts, we believe that most of the key catalysts for growth are discounted at the current juncture. Hence, we give an “Expensive” rating on the stock at the current market price of A$10.470 per share, up 2.146% on 14^th October 2019.
 

Accent Group Limited

Decent Growth in Profit:Accent Group Limited (ASX: AX1) owns and operates several footwear and apparel businesses in the performance and active lifestyle sectors and has a market capitalisation of A$867.47 Mn as on 14^th October 2019. The company has recently announced that Daniel Agostinelli has acquired 319,512 ordinary shares, following exercise of the performance rights. The company stated that FY19 has been another record year of profit amounting to $53.9 Mn, reflecting a rise of 22.5% on the prior year. It continues to deliver against its growth plan objectives in gross margin improvement, the launch of new stores, The Athlete’s Foot (or TAF) franchise acquisitions along with innovation in digital and instore customer experience.


Key Metrics (Source: Company Reports)

Future Prospects:AX1 aims to achieve profit growth in FY20, anticipated to be achieved via low single-digit LFL growth, continued strong digital growth, 40 new stores, 54 stores annualising from FY19 and 65 current and new TAF corporate stores. It added that the gross profit margin % and the cost of doing business % are anticipated to be in-line with the previous year.

Stock Recommendation:The net margin of the company stood at 6.8% in FY19 in comparison to the industry median of 3.4%. This implies that the company has better capabilities to convert its top-line into the bottom-line as compared to the broader industry. On the valuation parameters, the EV to sales ratio of the company stood at 1.1x against the industry median (Consumer Cyclicals) of 1.2x on a TTM basis. As per ASX, the stock of AX1 is trading at a price to earnings multiple of 15.970x in comparison to the industry average (Specialty Retailers) of 16.0x on a TTM basis. Thus, considering the above-stated facts, we give a “Hold” rating on the stock at the current market price of A$1.555 per share, down 2.812% on 14^th October 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

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