G8 Education Ltd

GEM Details

Positive outlook, decent pipeline and industry dynamics:G8 Education Ltd (ASX: GEM) stock has fallen 23.36% in three months as on May 14, 2018 as the industry is highly fragmented and top players account for less than 25% of market share, however, GEM has an attractive pipeline of 40 centres in the next 2 years. The supply growth is expected to continue to moderate in line with credit availability, which will provide opportunity for disciplined performance going forward. As a result, the industry occupancy is expected to recover. Further, the increasing childcare participation rates will continue with the female labour force participation, early education benefits and greater government support. The Government funding will increase under new scheme by c.16% to c.$8bn. The increase in Government funding is due to commence in July 2018 and is projected to drive increased demand in the sector. The New Child Care Funding package will benefit to 95% of existing GEM families, which will have positive impact on occupancy and revenues in H2. Moreover, so far in 2018, supply environment is still challenging, with LFL occupancy down circa 2.5 to 3%. However, prior year acquisitions continue to grow occupancy and are projected to deliver earnings in line with expectations for the full year 2018. Meanwhile, GEM stock is trading at a reasonable P/E, and we give a “Hold” recommendation on the stock at the current price of $ 2.480, which is slightly above its 52-week low price level.
 

GEM Daily Chart (Source: Thomson Reuters)
 

Village Roadshow Ltd

VRL Details

Cinema Exhibition division expected to realise a partial recovery:Village Roadshow Ltd (ASX: VRL) stock has fallen 26.47% in three months as on May 14, 2018 after the company downgraded its earnings forecast for FY 18. The company now expects its FY18 net profit after tax (NPAT) to be within the range of a $10 million loss to break even. Earlier the company was expecting full year 2018 NPAT to be between $12 million and $17 million. Moreover, VRL’s two main divisions, Theme Parks and Cinema Exhibition, had experienced challenging trading conditions. This is because low attendance numbers impacted VRL’s Theme Parks on the Gold Coast over the course of the Commonwealth Games and March trading conditions. However, the success of the Commonwealth Games for the Gold Coast will benefit the Parks in the longer term from the highly visible media coverage generating tourism growth into the region. Further, VRL considers that the new pricing/ticketing and marketing strategy for the Theme Park division will be profit accretive however the impact for FY18 cannot be fully assessed until after the key annual pass renewal period of May/June. Additionally, Cinema Exhibition division is expected to realise a partial recovery in the remainder of FY18 as major releases such as Avengers: Infinity War, Solo: A Star Wars Story, Deadpool 2 and Jurassic World: Fallen Kingdom are all scheduled to be released in the last quarter of the financial year 2018. Meanwhile, VRL stock rose up 2% on May 15, 2018, and is trading at a very low P/E. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 2.300.
 

VRL Daily Chart (Source: Thomson Reuters)
 

Woolworths Group Ltd

WOW Details

Third Quarter Sales Results: Woolworths Group Ltd.’s (ASX: WOW) stock fell 0.7% on May 15, 2018 after some media reports that few WOW and Coles supermarkets have had to put the products behind the counter to limit the number of products a single consumer can buy. This is due to daigou shoppers, who are buying infant formula and then selling it directly to China-based consumers at inflated prices. On the other hand, the company’s third quarter was strong. In the third quarter 2018, Australian and New Zealand Food’s Easter-adjusted comparable sales rose by 4.0% and 3.8% respectively, despite the impact from the timing of New Year’s Day. Endeavour Drinks’ Easter-adjusted comparable sales grew by 3.3%. The BIG W turnaround is still a work in progress with sales declining 1.2% on an Easter-adjusted basis in the quarter, driven by the timing of New Year’s Day and school holidays in NSW.
 

Third Quarter Sales Results (Source: Company Reports)
 
Moreover, in the third quarter, online sales growth remains strong in Australian Food with two new customer fulfilment centres (CFCs) commissioned during the third quarter and ongoing growth of Pick up. The 1Store (based on 1POS, centralised ticketing, and next generation back office software upgrades) is due for completion by end of June for Woolworths Supermarkets and BWS. Australian Food’s Voice of Customer (VOC) scores continued to improve in the third quarter with both Overall Customer Satisfaction of 81% and store-controllable VOC of 84% up on the prior year. Additionally, in the third quarter, Petrol sales were in line with the prior year. WOW stock has risen 7.48% in three months as on May 14, 2018 and is trading at a P/E of 20.87x. While some may view the current stock price to be at a higher side, WOW still seems to be a good conviction stock with growth backed by the rising market share against competitors. Therefore, based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $ 28.540.
 

WOW Daily Chart (Source: Thomson Reuters)
 

BWX Ltd

BWX Details

Growth Opportunities: BWX Ltd (ASX: BWX) is getting revenue from the portfolio of 7 natural BPC brands and an online platform. However, future revenue will be driven by platform of scale with a combination of organic growth and mergers & acquisitions. The company can increase their distribution in untapped international markets, can launch new SKUs in existing lines apart from developing new products and avail opportunity to make further strategic acquisitions. The company can also expand market share in existing channels as well as adjacent new channels. Additionally, for FY 18, BWX expects EBITDA to be in the range of A$42-A$43m. Meanwhile, BWX stock has fallen 34.45% in three months as on May 14, 2018. However, the global natural beauty and personal care market is forecasted to be a $50 billion industry by 2019 and it’s growing at a 14% CAGR since 2015. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 4.650.
 

BWX Daily Chart (Source: Thomson Reuters)

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