Stocks’ Details
 

Kathmandu Holdings Limited

Oboz Business Delivers Strong Growth:Kathmandu Holdings Limited (ASX: KMD) is engaged in the design, marketing and retailing of clothing and equipment for outdoor, travel and adventure. The company recently updated that Andrea Martens was appointed as an Independent Director on the Board. Accident Compensation Corporation became a substantial shareholder of the company with the voting power of 5.029%.

1HFY19 Highlights: During the six months ended 31 December 2018, group sales amounted to NZD $232.0 million, reporting an increase of 13.3% on prior corresponding period. The company’s gross margin during the period improved by 60bps. Normalised EBIT for the period amounted to $19.8 million, up 10.0% on prior corresponding period and reported EBIT amounted to $20.9 million.


1HFY19 Results Summary (Source: Company Reports)

Business Updates: Total sales from Australia increased by 2.7% during the period. Sales to New Zealand went down by 1.9%. The company’s Oboz business continued to grow strongly in the period with pro forma sales growth of 38.6%.


Oboz Business Performance (Source: Company Reports)

Outlook: The company is focused on achieving sales and profit growth in its core Australasian business to fund investment for future growth.

Stock Recommendation: The stock of the company generated returns of 1.50% and -5.58% over a period of 1 month and 3 months, respectively. During 1HFY19, the company witnessed a rise in group sales, and gross margin also improved. Its Oboz business recorded a strong growth with an EBIT growth of 77.1% on pcp. The company progressed well on diversification of product, brand, channel, geography and seasonality, particularly through the success of Oboz business. In addition, the company is aiming to grow the business further by expanding the customer and product base and growing the international business through customer relationships. Hence, considering the performance in the first half and growth strategy in place, U.S. retail sales for June quarter at 0.4% prima facie, signalling higher consumer spending, etc., we recommend a “Buy” rating on the stock at current market price of $2.030, reporting no change on the previous trading price on 02 August 2019.
 

Accent Group Limited

Strong Sales Growth and Gross Margin Improvement:Accent Group Limited (ASX: AX1) is engaged in retail and distribution of branded performance and lifestyle footwear. The company recently notified that it will announce annual results for FY19 on 23 August 2019.

Financial Highlights: During the six months ended 31 December 2018, the company reported a net profit after tax of $32 million, up 27.3% on prior corresponding period NPAT of $25 million. EBITDA for the period was reported at ~$61 million, up 23.3% in comparison to ~$49 million in 1HFY18. The company witnessed an increase of 20% in earnings per share at 5.69 cents.


1HFY19 Financial Highlights (Source: Company Reports)

Retail Performance: During the period, the company reported owned retail sales of $331.1 million, up 12.2% on the prior corresponding period. Gross margin also witnessed a significant improvement of 330 basis points. During the half, the company opened 35 new stores, refurbished 15 stores and closed 16 stores.

Trading Update & Outlook: For the first 7 weeks of H2FY19, the company’s retail sales have reported an increase of 2.5% on pcp and the gross margin percentage has also gone up by over 100 bps. The company expects at least 10% growth in EBITDA in the second half.

Stock Recommendation: The company’s stock generated returns of 5.04% and -7.59% over a period of 1 month and 3 months, respectively. The company reported a good start to the second half of FY19 with retail sales and gross margin reporting a rise on pcp during the first 7 weeks. The first half was also characterised by strong gross margin improvement, sales growth from online, and new & annualising stores and low single-digit LFL sales growth. During 1HFY19, the company had an EBITDA margin of 15.7%, which is higher than the industry median of 6.9%. The company’s net margin for the period stood at 8.0% as compared to the industry median of 4.2%. Moreover, the US retail sales for June quarter at 0.4% was better than expected, indicating improved consumer spending. Currently, the company’s stock is trading slightly below the average of 52 weeks high and low price of $1.050 and $1.710, respectively, with PE multiple of 15.42x. Hence, considering the aforesaid factors and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $1.460, down 1.684% on 02 August 2019.
 

Baby Bunting Group Limited

Above-Industry Gross Margin at 34.6% in 1H19:Baby Bunting Group Limited (ASX: BBN) is primarily engaged in the operation of Baby Bunting retail stores and its online store babybunting.com.au. The company recently updated that it will be releasing FY19 results on 16 August 2019.

FY19 First Half Results: During the first half, the company generated total sales amounting to $177.7 million, up 17.2% on prior corresponding period. The period ended with strong comparable store sales growth of 9.5%. Gross profit income was reported at $61.5 million, up 22.9% on pcp. The company reported pro forma EBITDA of $11.6 million, up 25.0% on the prior corresponding period. Statutory NPAT stood at $5.2 million, up 27.8% on pcp. During the period, the company declared a fully franked dividend of 3.3 cents per share.


Financial Summary (Source: Company Reports)

FY19 Guidance: The company expects FY19 EBITDA, excluding employee equity incentive expenses, to be in the range of $25 million to $27 million. FY19 gross margin is expected to be approximately 35%.

Stock Recommendation: The stock of the company generated returns of 36.90% over a period of 1 year. The first half of FY19 was characterised by strong market share growth and a recovery in gross margins that support the company’s ongoing growth strategy. The company continued expanding its store network and had around 52 stores at the end 1H19 period. Gross margin during the period, improved by 160 basis points to 34.6%. In addition, the company expects to report a higher gross margin for FY19, as suggested by the guidance. As compared to pcp, the company has improved on EBITDA margin from 5.6% in 1HFY18 to 6.0% in 1HFY19. The company has a gross margin of 34.6%, which is higher than the industry median of 22.3%. Currently, the stock is trading towards its 52-week high level of $2.630 with PE multiple of 28.05x.  Hence, in view of aforesaid facts and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $2.300, down 2.128% on 02 August 2019.

 
Comparative Price Chart (Source: Thomson Reuters) 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.