Stocks’ Details
Myer Holdings Limited
Decent Growth in Online Sales: Myer Holdings Limited (ASX: MYR) is an operator of departmental stores in Australia with a market capitalisation of ~$180.68 million as on 23rd October 2020. During FY20, the company recorded total sales of $2,519.4 million, indicating a fall of 15.8% on the previous year. This fall was mainly due to extensive closures of stores as a result of COVID-19 pandemic as well as a decline of 3.3% in comparable-store sales. On the other hand, the company reported a robust rise of 61.1% in online sales to $422.5 million. Net loss after tax for the period amounted to $11.3 million. During the year, MYR experienced an improvement of 13.8% in Cost of Doing Business (CODB) to $863.8 million.
Key Financials (Source: Company Reports)
Outlook: Going forward, the company will maintain its focus on cash preservation and deleveraging the balance sheet. In addition, MYR would also be focused on the economics of its physical stores.
Valuation Methodology: Price to Book Value Multiple Based Relative Valuation (Illustrative)
Price to Book Value Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
Stock Recommendation: The company closed FY20 with a net cash position of $7.9 million, reflecting an improvement of $46.6 million on the prior year. This was supported by a disciplined approach to preserving cash, disciplined cost control, support from the Australian Government and other payment deferrals. The 52-week low-high range for the stock stands at $0.083 - $0.590, respectively. The stock of MYR has provided a return of 12.19% and 21.05% in the last three and six months, respectively. On the technical analysis front, the stock price of MYR has an immediate support level of ~$0.191 and a resistance level of ~$0.286. We have valued the stock using a P/BV multiple based illustrative relative valuation method and arrived at a target price of lower double-digit upside (in percentage terms). For the purpose, we have taken peers such as Harvey Norman Holdings Ltd (ASX: HVN), Metcash Ltd (ASX: MTS), Kathmandu Holdings Ltd (ASX: KMD), etc. Thus, considering the growth in online sales, improvement in CODB, focus on cash preservation and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.230 per share, up by 4.545% on 23rd October 2020.
Mosaic Brands Limited
Achievement of CODB Savings: Mosaic Brands Limited (ASX: MOZ) is involved in the business of retailing women’s apparel and accessories. The market capitalisation of the company stood at ~$63.79 million as on 23rd October 2020. For the year ended 28th June 2020, the company reported revenue amounting to $736.77 million as compared to $881.92 million in FY19. Further, the company reported an underlying EBITDA loss of $45.8 million. MOZ achieved Cost of Doing Business savings of $50 million over the previous year with a further savings of $18 million, which are likely to be realised in FY21. In FY20, the company reported strong and accelerating online digital department store sales of $93.7 million.
Online Sales (Source: Company Reports)
Outlook: For FY21, the company is focused on margin growth via lower discounting and accelerating expansion of categories and SKUs’ throughout its digital department stores. The company is in a decent position to return to sustainable profitability in FY21. MOZ is scheduled to conduct its 2020 Annual General Meeting on 29th October 2020.
Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)
Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
Stock Recommendation: The company ended FY20 with a robust cash position of $77.6 million. The 52-week low-high range for the stock stands at $0.195 - $2.750, respectively. On the technical analysis front, the stock price of MYR has an immediate support level of ~$0.452 and a resistance level of ~$1.140. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). For the purpose, we have taken peers such as Harvey Norman Holdings Ltd (ASX: HVN), Metcash Ltd (ASX: MTS), Michael Hill International Ltd (ASX: MHJ), etc. Thus, in light of the CODB savings, future focus areas, online sales growth, and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.680 per share, up by 3.030% on 23rd October 2020.
MyDeal.com.au Limited
Recent Listing on ASX: MyDeal.com.au Limited (ASX: MYD) operates an online retail marketplace, focused on household goods like furniture and homewares. The market capitalisation of the company stood at ~$452.94 million as on 23rd October 2020. After the successful IPO (Initial Public Offering) of $40 million, MYD commenced trading on ASX on 22nd October 2020. The company’s IPO witnessed robust demand from both institutional and retail investors. Under the IPO, the company has raised $35 million via the issue of 35.0 million new shares and $5 million through the sale of 5.0 million shares at $1.00. The company has planned to utilise the IPO proceeds to improve its private label business and for investment in its proprietary technology, which includes development and launching mobile apps for iOS and Android devices.
Decent Growth in Gross Sales: The company mainly generates its revenue from the commission fee, which it receives from its seller for every product and service sold on the marketplace. In addition, the company also makes other ancillary revenues, which mainly include transaction fees, advertising revenue, subscription fee, etc. During Q1 FY21, the company reported strong growth in business with gross sales of around $56.7 million, reflecting a rise of 317% as compared to Q1FY20. Q1 also witnessed strong growth of 27% and 55% in the number of orders from new and returning customers, respectively. As on 30th September 2020, active customers of the company stood at 669,897 as compared to 181,945 as on 30th September 2019.
Active Customers (Source: Company Reports)
What to Expect: The company believes that the trend of growth in gross sales would continue into the Q2FY21, which happens to be the Christmas trading period. The company seems well-positioned to capitalise on key sale events in November and December, which include Black Friday, Cyber Monday, and Click Frenzy.
Stock Recommendation: With respect to its private-label business, the company will be focused on enhancing the product range over the upcoming months. At the end of FY20, the cash balance of the company stood at $2.33 million as compared to $2.28 million at the end of FY19. As per the prospectus, the offer price for the IPO stood at $1.00, and the stock settled at $1.710 on 23rd October 2020. Thus, considering the current trading levels, we give an “Expensive” rating on the stock at the current market price of $1.710, down by 2.286% on 23rd October 2020. We suggest investors to wait for further catalysts to drive the stock.
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)
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