Harvey Norman Holdings Limited 

FY 2018 Results Highlighted Strength in Business Model: The profit before tax or PBT return on the net assets stood at 18.05% in FY 2018 and the management of Harvey Norman Holdings Limited (ASX: HVN) stated that robust yearly results reflect the strong momentum in the company’s business model. According to them, the integrated approach would help the company change as per the needs as well as demands of the new technologies and the customers moving forward. The management reflected favourable views for the offshore Harvey Norman branded company-operated stores and stated that each and every region operating overseas reported strong trading result as well as profitability.


HVN’s metrics (Source: Company Reports)

However, the company did witness some negative impacts in the franchising operations segment. The profit from this segment witnessed a decline of 7.2% in FY 2018 on the YoY basis.The decline was witnessed on the back of lower franchise fees as well as because of the increased tactical help so that the brands are enhanced, promoted as well as protected. However, elevated levels of other costs in order to carry out the operations of the franchising operations segment also contributed to the decline.  

Robust Deployment Activities in Overseas Operations to Support Future Prospects: The management of Harvey Norman believes that they would be working to improve the performance overseas and they also have plans to make significant deployments so that the store network can grow especially in South East Asia. The company has been working towards opening up of the new sites.

Harvey Norman plans to come up with one flagship store in 8 countries in which either the company itself has operations or its franchisees have operations. The company plans to make continuous investments towards the Flagship Strategy. The company is highly optimistic about the growth prospects from South East Asia and has plans to open up nine stores in Malaysia in the time-span of 2 years.

Stock Analysis: On the monthly chart of Harvey Norman, Moving Average Convergence Divergence or MACD and Relative Strength Index or RSI has been applied by using the default values. As per the observation, the MACD line has crossed the signal line and is moving downwards. Moreover, the stock price has also crossed the EMA and moving downwards. Considering the technical analysis, the stock might further move in the downward direction. Therefore, we maintain our “Expensive” rating on the stock at the present market price of A$3.250.   
 

Super Retail Group Limited

Omni-retail capabilities, Operating cash Flow Performance aided FY 2018: Super Retail Group Limited (ASX: SUL) reported strong results for FY 2018 and recorded total sales amounting to $2.5 billion which implies an increase of 4.2% on pcp or prior corresponding period. During the same period, the company also saw a growth of 5.8% over prior corresponding period in total segment EBITDA to $294.1 million. The company also witnessed the robust performance in regard to the operating cash flow which reflects the company’s capability to garner working capital savings so that it can finance the investment opportunities in new stores. This could also help in building omni-retail capabilities.

SUL’s Sales and Total Segment EBIT (Source: Company Reports)

The company has relaunched the websites of Supercheap Auto, Rebel as well as BCF on the salesforce commerce cloud. The management of the company also stated that the deployments in the supply chain are helpful when it comes to productivity as well as working capital savings. The company has been focusing on improving customer management capabilities as well as aims to enhance direct-to-customer delivery. The transformation initiatives have been aided by the company’s sports as well as outdoor divisions.

What SUL Plans to Do Moving Forward: Super Retail Group is focusing on the strategy execution moving forward and also has plans to increase its market share. The management of the company stated that it has been planning to grow Macpac. They believe ample opportunities still prevail in the BCF as well as Rebel to improve the sales and margins which can be tapped with the help of improved operational execution.

Super Retail Group has also initiated numerous group-wide programs which could help in improving the capability throughout the organisation. Additionally, the company also plans to have a look at the core business processes so that the cost investments can be optimised.

Stock Analysis: A technical indicator, Moving Average Convergence Divergence or MACD, has been applied on the daily chart of Super Retail and default values have been used.After careful observation, it was noticed that MACD line has crossed the signal line and is moving upwards. Therefore, the crossover was a bullish one and further upside momentum is also expected on the stock. As a result, we maintain our “Hold” rating on the stock at the current market price of A$7.430.
 

Accent Group Ltd

Growth in Top-line:Accent Group Ltd. (ASX: AX1) distributes and markets footwear and apparel. The Company offers a wide range of sneakers, athlete footwear, and work boots. Accent Group serves customers in Australia. The company has a market cap of $681.96 Mn as on November 14, 2018. Recently, the company declared its FY 2018 numbers stating that the company has achieved a total owned sale of $676 Mn which is up 9.3% on Y-O-Y basis.

This expansion was on the back of an exceptional digital sales growth of 131% and opening of 31 new stores. EBITDA for the year clocked at $90.8 Mn, up 16% on a Y-O-Y basis this is on account of its sustainable Top- line growth and margin expansion, resulting due to vertical brands penetration and the strategy to reduce the discount driven retailing compared to previous year.

 
Growth Proposition: Going forth, the company expects to open more than 30 new Australian stores in FY 2019 & 30-40 new stores in New Zealand in next 2-3 years which will again boost its top line. Also, there would be new product launches and hence increased penetration could be seen in the vertically distributed brands. The company will also focus on its organic expansion through its Platypus brand.

   
AX1’s Underlying EPS and DPS (Source: Company Reports)
 
Meanwhile, the stock price has fallen by 13.99 % over the past one month, also over the period of past 6 months the stock has marginally fallen by 2.33%. However, if we look at the YTD performance, the stock has given stellar returns of 50 %. Considering strong stock performance and expected robust top line growth, we maintain our “Hold” recommendation on the stock at the current market price of $1.220.
 

 
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