Stocks’ Details

Kathmandu Holdings Limited

Accelerated Sales Growth from Oboz: Kathmandu Holdings Limited (ASX: KMD) is engaged in designing, marketing and retailing of clothing and equipment for outdoor travel and adventure.

Capital Raising: The company is planning to raise an amount of NZ$145 millionthrough an issue of shares under an institutional bookbuild component of its fully underwritten 1 for 4 pro-rata accelerated entitlement offer. In addition, the company also has in place a retail entitlement offer that is expected to close on 21 October 2019.

Acquisition of Rip Curl: The company has entered into a binding agreement for the acquisition of Rip Curl for a total consideration of A$350 million.Closure of the deal is expected by the end of the calendar year 2019, subject to shareholder approval and standard closing requirements, and will be a good strategic fit for Kathmandu Holdings Limited.

Dividend: The company will pay a dividend amounting to NZD 0.1200 per ordinary share on 11 October 2019.

Highlights of FY19 Results: During the year ended 30 June 2019, the company reported sales amounting to NZ$545.6 million, up 9.7% on prior corresponding period. EBIT for the period stood at NZ$84.3 million, up 12.7% on pcp. NPAT amounted to NZ$57.6 million, representing an increase of 13.6% on the previous year. In FY19, sales for Oboz witnessed a growth of 30.0% and EBIT growth of 38.6%.


Key Financial Highlights (Source: Company Reports)

Stock Recommendation: Over a period of 6 months, the stock generated returns of 24.00% and has a market capitalisation of $632.6 million. In FY19, the company reported favourable outcomes from Oboz acquisition that accelerated overall group sales during the period. The business reported continued growth in key accounts and core styles, while simultaneously diversifying its product and customer mix. Going forward, the company will work on improving its performance in core markets through distinctive offerings. In FY19, the company had a gross margin of 60.9%, higher than the industry median of 22.3%. EBITDA margin for the year stood at 18.4% as compared to the industry median of 6.8%. Considering the above factors, we give a “Hold” recommendation on the stock at the current market price of $2.890, up 3.584% on 04 October 2019.
 

City Chic Collective Limited

All Eyes on Avenue Stores’ Acquisition:City Chic Collective Limited (ASX: CCX) operates in the women’s fashion retail sector in Australia, New Zealand, Germany, UK and the USA.

Acquisition Update: The company recently notified on its bid for acquiring the assets of Avenue Stores, LLC, as a speciality retailer in the US. CCX won the auction at a bidding price of US$16.5 million that will be financed from cash and credit facilities. The transaction is expected to close in mid-October upon approval by the US Bankruptcy Court.

FY19 Financial Summary: During the 52 weeks period to 30 June 2019, sales revenue for the company amounted to $148.4 million, up 12.6% on previous year. Underlying EBITDA for the year stood at $24.9 million, up 25% on pcp. Comparable sales for the year witnessed a growth of 12.2%, as compared to 15.0% in FY18. Gross profit margin stood at 57.8%, against the previous year’s margin of 59.0% due to a shift in channel mix to online and growth in wholesale. The company paid a fully franked final dividend of 1.5 cents per share on 30 September 2019.


Financial Performance (Source: Company Reports)

Outlook: So far, the company has delivered a positive comparable sales growth in year to date which is expected to continue for the full year of FY20. Plans in the pipeline to drive future growth include roll-out of new stores across Australia and New Zealand, expansion into new segments, growing the customer base in the USA and new partnerships in the northern hemisphere.

Stock Recommendation: The stock of the company generated returns of 80.46% over a period of 1 year and is currently trading close to its 52-week high level of $2.840.In FY19, the company witnessed decent comparable sales growth, driven by the performance of online channels. The period was also marked by a strong PBT margin on account of low capital requirements and an improvement in EBITDA margin. The company recently notified about the acquisition of Avenue Stores which is due for approval by the US Bankruptcy Court that caused the share price to rise by over 11%. Given the backdrop of aforesaid factors and current trading levels, we have a wait and watch stance on the stock at the current market price of $2.780, up 11.2% on 04 October 2019.
 

PWR Holdings Limited

Fluctuations in Forex Rates to Impact Results in F20:PWR Holdings Limited (ASX: PWH) is engaged in designing, prototyping, production and sales of advanced cooling products and solutions. The company recently updated that the voting power of Tribeca Investment Partners Pty Ltd reduced to 6.73% from 7.76% earlier.

Financial Highlights: During the year ended 30 June 2019, the company generated revenue amounting to $65.41 million, up 26.1% on prior corresponding period revenue of $51.89 million. EBITDA for the period stood at $21.76 million, up 33.2% on previous year EBITDA of $16.34 million. NPAT for the year stood at $14.21 million, representing an increase of 29.1% yoy.


FY19 Financial Summary (Source: Company Reports)

Outlook: Going forward, the company is aiming to grow via a 2-year business growth and investment program that will be funded from the company’s cash reserves and operating cash flows. The company expects the fluctuations in foreign currency exchange rate to impact the results and has currently determined hedging of approximately 50% of expected GBP revenue to June 2020.

Stock Recommendation: Over a period of 1 year, the stock generated returns of 48.68% and is currently trading close to its 52-week high level of $4.980. Performance in FY19 was characterised by a record NPAT and a strong second half due to the seasonal activity in motorsports industry. The company reflected a strong financial position with cash in hand of around $20 million as at 30 June 2019. Financial results will continue to be impacted by fluctuations in foreign currency exchange rate. Considering the above scenario, we have a watch stance on the stock at the current market price of $4.750, down 1.042% on 04 October 2019.
 

Comparative Price Chart (Source: Thomson Reuters)

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