Lovisa Holdings Limited (ASX: LOV)

LOV Details

Trading in line with expectations: Lovisa Holdings Limited’s Chief Executive Officer, Steve Doyle, resigned to pursue other interests and will be stepping down from his role effectively from 10 April 18. Founder and Managing Director, Shane Fallscheer will continue to lead the Company. Meanwhile, LOV also announced that in the 13 weeks since 31 December 17, the business has continued to take the advantage of strong global trends in the fashion jewellery sector which resulted in the comparable store sales of more than 7.6 per cent for the year and till the end of Q3FY18, and its total sales growth was more than 20.3 per cent. Post the end of the half year, 5 new stores have been opened and 4 have been closed and 320 stores are currently trading.As per the March quarter rebalance of S&P/ASX indices, LOV has been added to S&P/ASX 300 Index effective from March 19, 2018.
 

Half year Sales Trend (Source: Company Reports)
 
The Company continues to invest in the structure of the business to support the global growth. The Board declared a fully franked interim dividend of 13.0 cents and this was 3.0 cents more than the prior comparable period. The share price was up by 90.8 per cent in the past six months and by 4.17 per cent in the past five days. However, with the news of the CEO Resignation, the share price dropped by 6 per cent on April 04, 2018. Despite the fall, the stock looks “Expensive” at the current market price of $9.40
 

LOV Daily Chart (Source: Thomson Reuters)
 

Australian Agricultural Company Limited (ASX: AAC)

AAC Details

Soft outlook for FY18: The Company released a market update in relation to its FY18 results. Based on preliminary and unaudited results for 12 months till March 2018, it is expected that operating EBITDA and negative operating cash flow will be in the range of $12-$16 million and between $(38) million to $(42) million, respectively, while the Company had reported a positive operating cash flow of $29.3 million for FY17. FY18 audited results are subject to several factors including review by AAC’s auditors and finalisation of the livestock market valuation, and finalisation of the Livingstone Beef impairment charge. Company’s performance in H2FY18 has been affected by external challenges like increased competitive dynamics in certain markets, higher Australian dollar and higher input prices.
 

Negative Operating Cash Flow Trend (Source: Company Reports)
 
Expected FY18 Operating Cash Flow is impacted by an increase in working capital and in livestock and by higher finance cost. The Group has identified the changes that need to be done to improve the shareholders’ return, increase the profitability and drive the cash flow generation across its supply chain. Dimensional Entities ceased to be a substantial holder of the Group from 07 March 18. The share price was up by 8.93 per cent in the past one month at the back of some takeover speculation; but plunged by 8.2 per cent on April 04, 2018 with the above update. We have a “Hold” on the stock at the current market price of $1.12, while the group aims to plan for a turnaround strategy.
 

AAC Daily Chart (Source: Thomson Reuters)
 

G8 Education Limited (ASX: GEM)

GEM Details

Decent Return on its Invested Capital: GEM recently confirmed that Ms Hutson (former Chair) has been named in some charges and that no allegations have been made against G8 or against any other current board member or staff and G8 has no contact with ASIC on this matter since 2016. Meanwhile, FIL Limited became the substantial holder of the Group since 23 March 18 by holding 23,625,011 shares with 5.21 per cent of the voting power. GEM delivered 2.2 per cent of growth in underlying EBIT in FY17 which was achieved in a challenging environment and the results were slightly behind the guidance. The acquisitions were performing in line with expectations and delivered an incremental EBIT of $12 million. The total revenue for FY17 increased by 2.4 per cent as compared to FY16.
 

Growth by Development and Acquisition (Source: Company Reports)
 
The development portfolio which was announced last year was on track; and as a part of its ongoing portfolio management, the Group divested 22 underperforming centres. The Group delivered a 13.2 percent of Return on its Invested Capital despite of the current challenging market environment but was slightly lower as compared to prior year. Occupancy for the first 5 weeks of 2018 has been stable as compared to December 17 occupancy rate. The stock price advanced by 3 per cent in the past one month and was down by 4.5 per cent as on April 04, 2018. We give a “Hold” recommendation at the current market price of $2.49
 

GEM Daily Chart (Source: Thomson Reuters)
 

Resolute Mining Limited (ASX: RSG)

RSG Details

Acquisition of stake in Loncor Resources: The Company has entered into a binding agreement to secure 27 per cent of interest in Loncor Resources Inc. The agreement outlines a series of transactions which will expand Loncor’s existing asset base and after this RSG will hold 51,000,000 of common shares of Loncor via subscription placement of CAD$2.6 million of new Loncor shares and through a ‘share swap’ of CAD $2.5 million of Resolute shares for 25,000,000 existing Loncor shares. Investment in Loncor was opportunistic and was a part of a broader Resolute strategy. The Group is establishing a strategic position by acquiring interests in successful explorers with large holdings. The Agreement is subject to completion of satisfactory due diligence and will have to take the consent of the Loncor’s shareholders. Meanwhile, RSG expects production and unit cost to improve in the second half as it is progressing with high grades at both Syama and at Ravenswood. Resolute’s ambition is to become a technology-driven, multi-miner and a low cost global gold producer; and has a world class tenure that covers an underexplored belt which already yields several multi-million ounces of ore bodies. The share price rose up by 25.49 per cent in the past six months and still has room for upside momentum given the price to earnings scenario. We give a “Buy” recommendation at the current market price of $1.275
 

RSG Daily Chart (Source: Thomson Reuters)

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