RCG Corporation Limited (ASX: RCG)

RCG Details

Impact from challenging retail conditions: Footwear retailer, RCG Corporation’s stock slipped 4.5% on September 08, 2017 as the stock traded ex-dividend. The group has been removed from the S&P/ASX All Australian 200 Index effective September 18, 2017. In August 2017, the group had reported about challenging retail trading conditions that have continued since February 2017. The group’s sales performance across all business units for the months of March and April combined was below management’s expectations. For FY17, bottom line profit dropped 2.6% to $29 million after RCG wrote down the brand value at Hype by $9.7 million. On the other hand, the Athlete’s Foot’s LFL sales for the year-to-date was in line with the prior year performance. There was 79% growth in total online sales during FY2017. RCG declared a fully franked final dividend of 3.0 cents per share and expects its dividend payout ratio to be between 75% and 80% of underlying EPS for FY2018. The group has not commented on future performance at the back of volatile scenario. However, RCG is ramping up investment in digital with the aim of lifting online sales to 15% of total sales within three years. Given the trading conditions, we put a “Hold” on the stock at the current price of $ 0.83

Mantra Group Limited (ASX: MTR)

MTR Details

Boost from diversified geographic presence: Mantra Group is benefitting from the diversified geographic presence in the Australian accommodation market and an increasing presence in overseas markets. At the back of this aspect, MTR’s FY17 results entailed 12.7% rise in underlying EBITDAI of $101.2 million over FY16 and this has been in line with market guidance. Underlying NPAT of $47.2 million was also up $5.9 million, reflecting 14.2% year-on-year growth. Group’s total revenue surged 13.7% to $689 million from $606.1 million and EPS rose 10.9%. Strong trading results and decreased transaction costs helped in increasing the operating cash inflows. On the other hand, increased tax payments impacted the cash flow position slightly. The group had added about six properties to the network during the year and Mantra Hotel at Sydney Airport was opened in July 2017. MTR also entered into an agreement to acquire The Art Series Hotel Group with unique hotels in popular cultural hubs in key Australian capital cities, and the acquisition is subject to certain conditions. FY2018 underlying EBITDAI is now expected to be between $107 million - $115 million in constant currency terms. Though the group has scheduled and targeted projects for FY18 in place, however, it may need to work around the scheduled pipeline for FY19. The stock has moved up 5.9% in last one month (as at September 07, 2017). We give a “Hold” recommendation at the current price of $ 2.99
 

Pipeline Scheduled and Targeted (Source: Company Reports)

Navitas Limited (ASX: NVT)

NVT Details

Witnessing increase in student enrolments: Navitas has witnessed a healthy progression-to-university and pass rates in University Partnerships colleges and improved student experience and academic outcomes across all divisions in FY17. The student enrolment growth was 5% across University Partnerships colleges in the year (excluding closed colleges) supported by 8% growth in semester two 2017. NVT also renewed five University Partnerships contracts. Despite the above positives, NVT’s revenue was down 5% to $955.2 million owing to the closure of the Macquarie and Curtin Sydney colleges. NPAT was also down 11% to $80.3 million. On the other hand, there was 170 bps margin improvement across the Careers and Industry division businesses. Continual growth is expected from this newly created division that brought together group’s vocational teaching businesses into one focused operating division. While global demand for high quality education stays strong and will benefit Navitas, NVT’s performance going forward might be impacted by the decrease in contribution from fewer AMEP contract regions and no contribution in FY18 from the now fully closed Macquarie and Curtin Sydney colleges. On the other hand, the group is positive on delivering it’s 2020 strategic key performance indicators. We maintain a “Hold” at the current price of $ 4.41

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