Accent Group Limited

A Look at 1H FY 2019 Results: In 26 weeks ended December 30, 2018, Accent Group Limited (ASX: AX1) had posted net profit after tax on statutory reported basis of $32.2 million implying 27.3% YoY rise on the back of improvement in the gross margin, sales growth from online and new and annualising stores as well as low single digit LFL sales growth. The top management of the company had stated that strength of the brands, stores as well as customer proposition coupled with fully integrated omni-channel platform which has been built over last three years have supported the financial results.

Financial Overview (Source: Company Reports)

The company is also having a decent position with respect to key margins as its net margin stood at 7.0% in 1H FY19 reflecting YoY improvement of 185.8 bps demonstrating the company’s capability to convert the top-line into the bottom line. Also, the company’s EBITDA margin has encountered YoY improvement of 116 bps in 1FY19 and stood at 13.4%. The company had announced interim ordinary dividend amounting to 4.5 cents per share (fully franked) which reflects the rise of 50% on the YoY basis. The dividend will be payable on 21 March 2019 with record date of March 07, 2019.

What Investors Need to Watch in AX1: There are expectations that Accent Group would be witnessing at least 10% growth in EBITDA in 2H FY 2019. The increased interim dividend hints Board’s confidence in performance as well as financial strength of AX1. The Board is committed to return excess cash to the shareholders over the period of time. There are expectations that the company would pay fully franked dividends between 75%-80% of profit after tax in FY 2019.

Stock Recommendation: On the monthly chart of AX1, Exponential Moving Average or EMA has been applied and default values were used for the purposes. After careful observation, it was noticed that the stock price has crossed the EMA and had trended in the upward direction after the crossover. This reflects the bullishness. As a result, there are expectations that the stock might witness a rise moving forward.

Also, the company’s focus on returning the excess cash to shareholders might attract the market players’ attention.

Considering the above factors, we maintain our “Hold” rating on the stock at the current market price of A$1.430 per share (up 4.762% on 21 February 2019).
 

JB Hi-Fi Limited

Sales in JB HI-FI Australia Rose 4.7%:JB Hi-Fi Limited (ASX: JBH) released the HY 2019 results. The total sales of JB HI-FI Australia stood at $2.59 billion which reflects the rise of 4.7%, with the comparable sales up 3%. The company stated that key growth categories were Communications, Games Hardware, Audio, Fitness as well as Connected Technology. With respect to JB HI-FI Australia, the software sales witnessed a fall of 5.6% while, on the comparable basis, these were down 7.2% because of the continued declines in Movies and Music categories which got partiallyoffset by robust growth in Games Software category.

JB HI-FI Australia (Source: Company Reports)

Understanding the Net Margin of JBH: The company is in a strong position when it comes to its net margin which stood at 4.2% at the end of December 2018 and is higher than the industry median of 3.9% demonstrating the company’s capability to convert the top line into the bottom line. The company’s current ratio stood at 1.18x at the end of December 2018 reflecting the rise of 2.5% on the YoY basis reflecting the improvement in liquidity levels and placing the company in a strong position to meet the short-term commitments.

What to Expect From JBH: In FY 2019, JB Hi-Fi Limited is targeting to open 5 JB HI-FI Australia stores and 2 The Good Guys stores.  In the same period, the company expects to close 2 JB HI-FI Australia stores as well as 1 JB HI-FI New Zealand store. In FY 2019, the company is expected to post total sales amounting to approximately $7.1 billion. Of this, JB HI-FI Australia is expected to make a contribution of $4.73 billion while JB HI-FI New Zealand might make a contribution of (NZD)$0.24 billion. However, The Good Guys is expected to make a contribution of $2.15 billion.  

Stock Recommendation: On the daily chart of JBH, Exponential Moving Average or EMA has been applied and default values were used for the purposes. After careful observation, it was noticed that the stock price has crossed the EMA and had trended in the downward direction after crossover which signifies bearishness.

However, the company might be benefited from the strong position which it possesses from the perspective of liquidity levels.

Meanwhile, the stock has risen 3.63 percent in the past three months as at February 20, 2019 and is trading at a reasonable PE level of 11.120x. However, the JBH’s stock remains the most shorted share on ASX as per the ASIC report of 15 February 2019. It is indicative of over 12.67% of short position. Hence, we advise market players to carefully watch the stock at the current market price of A$22.330 per share and wait for the better entry level.

Noni B Limited

A Look at 1H FY 2019 Results: Noni B Limited (ASX: NBL) had released its 1H FY 2019 results in which its underlying EBITDA stood at $29.1 million which implies the rise of 31.4% on the YoY basis. The company’s sales witnessed a rise of 140.4% and stood at $464.4 million following the acquisition of 5 brands from Specialty Fashion Group on July 2, 2018. In 1H FY 2018, the sales was 193.2 million. The company added that they have continued to deploy towards the online presence. The sales via online channels witnessed the rise of 27.9% which represents 9% of the total sales duringthe period. 

 
1H FY 2019 Highlights (Source: Company Reports)

Coming to the margins, the company’s net margin stood at 4.6% in FY 2018 reflecting the rise of 3.6% on the YoY basis which reflects the company’s improved capability convert its top line into the bottom line. The company’s EBITDA margin stood at 10.4% in FY 2018 implying a YoY rise of 5.1%.

What To Expect From NBL: The company reaffirmed the EBITDA to be in line with the market consensus of around $45 million for full FY 2019. However, it is subject to trading leading up to all-important Mother’s Day trading period. Thereare expectations that there would be full year benefit of synergies, together with the improvements in the gross margin, to result in EBITDA of more than $75 million in FY 2020 (consistent with the market consensus).

Stock Recommendation: On the daily chart of NBL, Exponential Moving Average or EMA has been applied and default values were used for the purposes. After observation, it was noted that the stock price has crossed the EMA and had trended in the upward direction after the crossover reflecting bullishness.

However, in the span of the previous six months, the company’s stock had delivered the return of -11.94%. Also, the company’s stock is trading reasonable PE multiple of 13.85x. Given the mix of scenario, we have a wait and watch view on the stock at the current market price of $3.060 (up 3.729% on 21 February 2019), as it traded at the higher level.
 

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