Stocks’ Details

Premier Investments Limited

H1FY21 Results Update: Premier Investments Limited (ASX: PMV) operates several speciality retail fashion chains in the markets of Australia, New Zealand, Asia and Europe. The market capitalisation of the company as on 24 March 2021 stood at ~$3.68 billion. The Group has recently announced its H1FY21 results and reported robust performance with an increase in statutory net profit after tax by 88.9% to $188.2 million, compared to the previous corresponding period. It reported sales of $784.6 million during the period, an increase of 7.2% on the pcp. The company achieved a record online sales of $156.7 million in H1FY21, up by $59.5 million from H1FY20. There was also an improvement in the cash position of the company to $497.2 million as of 30 January 2021.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The impact of the COVID-19 pandemic and the ensuing lockdown has made changes in the shopping behaviour of consumers. Many of them have shifted to online platform for their needs, thus driving the growth of such platforms in an uncertain macro-environment. PMV’s online platform continues to deliver higher margins in comparison to the retail store network, and it expects to provide significant operating leverage in the future.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has invested in its associate at $268.1 million and the market value of the investment as of 30 January 2021 stood at $1 billion. As per ASX, the stock of PMV is trading above the average of its 52-week levels of $8.130-$26.700. The stock of PMV gave a positive return of ~25.46% in the past six months and a positive return of ~11.52% in the past one month. On a technical analysis front, the stock of PMV has a support level of ~$22.827 and a resistance level of ~$24.638. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company might trade at a slight premium to its peer average P/E (NTM Trading multiple), considering the decent financial performance, significant increase in online sales during the period and optimistic outlook on its online platform. For the purpose, we have taken peers such as Mosaic Brands Limited (ASX: MOZ), Michael Hill International Limited (ASX: MHJ), City Chic Collective Limited (ASX: CCX) to name a few. Considering the current trading levels, valuation, decent financial performance in H1FY21 and decent growth in online sales, we recommend a ‘Hold’ rating on the stock at the current market price of $23.840, up by 2.670% as on March 24, 2021.

Graincorp Limited

Business Update: Graincorp Limited (ASX: GNC) is a diversified Australian agribusiness company. The market capitalisation of the company as on 24 March 2021 stood at ~$1.07 billion. As per a recent update, the company has announced an EBITDA contribution of $25 million by 2023-24 from new operating initiatives. The company believes that with the delivery of operating initiatives along with the completion of the international expansion in H2FY21, the ‘through-the-cycle’ EBITDA is expected to increase to $240 million by 2023-24.

FY20 Performance Update: The company delivered a resilient performance during the period and reported a statutory NPAT of ~$343 million, compared to a loss of ~$113 million in the prior corresponding period. The underlying EBITDA improved to ~$108 million, from a loss of ~$107 million on the pcp. There was also a significant improvement in the core debt of the company to ~$37 million.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company expects to deliver FY21 underlying EBITDA in the range of $230 million to $270 million and underlying NPAT of $60 million to $85 million. The optimal conditions experienced by the company in Eastern Australia during the recent winter cropping season have augmented its belief to deliver enhanced results in FY21.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company expects positive weather during FY22 winter crop planting, backed by the recent weather patterns. As per ASX, the stock of GNC is trading above the average 52-weeks’ level of $2.810-$6.470. The stock of GNC gave a positive return of ~23.57% in the past six months and a positive return of ~12.16% in the past one month. On a technical analysis front, the stock of GNC has a support level of ~$4.643 and a resistance level of ~$5.013. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company might trade at a slight premium to its peer median P/E (NTM Trading multiple), considering the resilient financial performance and optimistic outlook on climate conditions. For the purpose, we have taken peers such as Elders Limited (ASX: ELD), Inghams Group Limited (ASX: ING), Metcash Limited (ASX: MTS), to name a few. Considering the current trading levels, valuation, turnaround in financial performance in FY20 and optimistic earnings guidance in FY21, we recommend a ‘Hold’ rating on the stock at the current market price of $5.00, up by 6.157% as on March 24, 2021, owing the update regarding EBITDA contribution of $25 million by 2023-24.

Vita Group Limited

H1FY21 Results Update:  Vita Group Limited (ASX: VTG) is engaged in the selling and marketing of products and services through its networks and brands. The market capitalisation of the company as on 24 March 2021 stood at ~$156.42 million. During H1FY21, the company reported an EBIT of $28.1 million, an increase of ~27% on the prior period. NPAT grew by ~27% to $18.4 million, during the same period under consideration. The revenue stood at $323.7 million. VTG ended the period with a comfortable net cash position of $30.2 million. The company decided to approve a fully-franked interim dividend of 5.6 cents per share for FY21.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company has been able to deliver profitability owing to decent performance in the skin health and wellness channel and prudent management of expenses. The company expects continued challenging economic condition in its ICT segment, however, anticipates to deliver improved performance from its SHAW business division.

Key Risks: The Group is exposed to the impact of the COVID-19 pandemic on the economic environment and its businesses. It is also at risk with its partnerships with key clients. In this regard, Telstra has announced recently that it will transition to a full corporate ownership model from a Telstra branded retail store network, which will result in the conclusion of its present dealer agreement with VTG on 30 June 2025.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: As per ASX, the stock of VTG is trading above its average 52-weeks’ level of $0.605-$1.200. The stock of VTG gave a positive return of ~44.61% in the past one year and a negative return of ~2.08% in the past one month. On a technical analysis front, the stock of VTG has a support level of ~$0.905 and a resistance level of ~$1.183. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight premium to its peer average P/E (NTM Trading multiple), considering the decent bottom-line performance and net cash position of the Group. For the purpose, we have taken peers such as Shaver Shop Group Limited (ASX: SSG), Michael Hill International Limited (ASX: MHJ), to name a few. Considering the expected upside in valuation, resilient bottom-line performance, comfortable net cash position and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.940, down by 1.053% as on March 24, 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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