Stocks’ Details
 

Premier Investments Limited

 
NPAT up by 12.2% Year over Year in 1HFY20: Premier Investments Limited (ASX: PMV) is engaged in operating several specialty retail fashion chains within the specialty retail fashion markets in New Zealand, Australia, Asia and Europe. Recently, the company announced that Perpetual Limited and its related bodies corporate, a shareholder of the company, has increased its voting power from 8.97% to 9.97%.
 
1HFY20 Key Highlights for the Period Ended 25 January 2020: During the period, the company delivered group NPAT of $99.6 million, up by almost 12.2% year over year. Premier Retail sales for the period stood at $732.1 million, an increase of 7.6% on a year over year basis with. Online sales grew 28.4% and came in at $97.2 million. Premier Retail EBIT was recorded at $126.1 million, up 10.7% year over year. During the period, Premier Retail’s apparel brands achieved like for like sales growth of 7.5% across Australia and New Zealand. PMV also reported a strong and stable balance sheet with a cash balance of $199.8 million as at 25 January 2020.
 
 

Income Statement (Source: Company Reports)
What to Expect: Smiggle is maintaining an exclusive market position and has reiterated its growth strategy, targeting to deliver $450 million in annual global retail sales, maximum by CY22. The company had the target of $250 million in annual sales by FY20, which was already accomplished one year ahead of schedule.
 
Valuation Methodology:P/E Multiple Based Relative Valuation

P/E Based Valuation (Source: Thomson Reuters)
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months.
Stock Recommendation: As per ASX, the stock of PMV is trading close to its 52-weeks’ low level of $8.130. As on 24 March 2020, the market capitalization of the company stood at $1.42 billion, with outstanding shares of ~158.47 million. The stock is available at a P/E multiple of 12.06x. On the stock’s performance front, it delivered negative returns of 53.41% and 53.31% in the last three months and six months, respectively.We have valued the stock using P/E multiple based relative valuation method and arrived at a target price with lower double-digit upside (in percentage terms). For the said purposes, we have considered peers such as Star Entertainment Group Ltd (ASX: SGR), Breville Group Ltd (ASX: BRG) and Restaurant Brands New Zealand Ltd (ASX: RBD). Considering the robust performance in 1HFY20, strong balance sheet position, and current trading level, we recommend a “Buy” rating on the stock at the current market price of $9.49, up by 6.034% on 24 March 2020.
 

Bapcor Limited

 
FY20 Outlook Withdrawn on Covid-19 Fears: Bapcor Limited (ASX: BAP) operates as a distributor of automotive components within the aftermarket segment. On 24 March 2020, the company withdrew its prior FY20 earnings outlook, owing to the closure of its business in New Zealand, Thailand and Australia along with the COVID-19 outbreak and worsening economic conditions.
 
H1FY20 Operational Highlights for the Period ended 31st December 2019: During the period, the company reported revenue of $702.5 million, up 10.4% year over year, on the back of addition of 35 stores to its network. Pro-forma EBITDA came in at $79.4 million, up 4.6% from H1FY19. Net profit after tax on pro-forma basis came in at $45.3 million, soaring 5.1% on year over year basis. The company reported growth in revenue and EBITDA across every business segment. In December 2019, the company approved its acquisition of Truckline, which will add Heavy Commercial Vehicles in its product-line. The company declared dividend of 8 cents per share, up 6.7% year over year, with a payment date of 13th March 2020.The company ended 1HFY20 with a cash balance of $43 million.
 
 

Key H1FY20 Business Highlights (Source: Company Reports)
 
Valuation Methodology:P/BV Multiple Based Relative Valuation

P/B based Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of BAP is trading at $3.27 with a market capitalization of ~$908.66 million. The stock made a 52-week low and high of $3.14 and $7.525 and is currently trading at the lower band of its 52-week trading range. The stock has delivered negative returns of 51.45% and 55.4% in the last three months and six-months, respectively. The company remains on track and is taking additional initiatives to add commercial vehicle business of Truckline, which is expected to improve the future performance. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using P/B based relative valuation method. For this we have taken peers like ARB Corp Ltd (ASX: ARB), Corporate Travel Management Ltd (ASX: CTD) and GUD Holdings Ltd (ASX: GUD) and arrived at a target price of single-digit upside (in % terms). Hence, we give a ‘Hold’ on the stock at the current price of $3.27, up 2.83% as on 24 March 2020. 
 

Wesfarmers Limited

 
WES Remains on Track to Enhance Shareholders’ Value: Wesfarmers Limited (ASX: WES) is primarily engaged in the retailing of home improvement and outdoor living products as well as the supply of building materials. Recently, the company stated its Dividend Investment Plan (DIP) issue price for the interim dividend to be $37.8725. This will be issued to participants in the DIP on 31 March 2020.
 
Recent Update on Coronavirus Challenges: On 20 March 2020, the company stated that amid the uncertainty due to coronavirus outbreak, there has been weakness in sales of discretionary products, which includes apparel. Australian and other governments have taken necessary measures to curb the COVID-19 impact, which in turn signifies a risk to the outlook for retail sales across the Group.
 
Managerial Changes: On 19th March 2020, the company stated that David Baxby is going to step down as Managing Director of Wesfarmers’ Industrials division. On the other hand, Tim Bult, will take the place of Managing Director of Wesfarmers Industrial & Safety to support each of the CEOs of the corresponding businesses.
 
H1FY20 Operational Highlights for the Period ended 31st December 2019: During the period, the company reported a NPAT of $1,142 million (pre AASB 16), up 5.7% year over year, owing to robust performance of the WES’s largest businesses, Bunnings and Kmart, and ongoing solid performance in WesCEF. Revenues increased 6% and stood at $15, 249 million. The company declared an interim dividend of 75 cents per share in 1HFY20, fully franked.
 

Key H1FY20 Business Highlights (Source: Company Reports)
 
Outlook: The company’s portfolio of cash-generative businesses with leading market positions is well-placed to provide adequate shareholder returns over the long term. Retail divisions continues to focus on customers to offer even greater value, quality and convenience.
 
Valuation Methodology:P/E based Multiple Relative Valuation 

 
P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of WES is trading closer to its 52-week low level of $30.44. The market capitalisation of the company stood at $35.17 Bn as on 24 March 2020, with outstanding shares of ~1.13 billion. The stock is available at a P/E multiple of 16.08x.We have valued the stock using P/E based relative valuation approach, and for the purpose, we have taken peers such as Coles Group Ltd (ASX: COL), Woolworths Group Ltd (ASX: WOW), and Metcash Ltd (ASX: MTS), and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Hence, considering the current trading levels and aforesaid facts, we recommend a “Buy” rating on the stock at the current market price of $31.68, up by 2.128% on 24 March 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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