JB Hi-Fi Limited (ASX: JBH)

Expansion on track: Recently, Vanguard Group Inc. became a substantial holder of JB Hi-Fi Limited by holding 5,804,822 shares with 5.054% of the voting power. On the other hand, Challenger Limited ceased to become the substantial holder from December 2017. Year 2017 was another record year for JB Hi-Fi Limited as the Group achieved sales of 5.6 billion which was up by 42.3% on the prior year and underlying EBIT was $306.3 million which was up by 38.5% on the prior year. The sales growth remained in line with the expectations and JBH confirmed its sales guidance for FY 18 of circa $6.8 million. At the end of FY 17, the Group had 303 stores in Australia and New Zealand. In Australia, six new JB Hi-Fi stores were opened and in New Zealand one new JB Hi-Fi store was opened. With regards to acquisition of The Good Guys, JBH expects to achieve the upper end of the synergy target that is between $15 million to $20 million and this target is expected to be realised fully in FY 19.  It expects that the market will remain competitive as the retailers drive for the market share while the group will also continue to seek efficiencies and drive further synergies and any upside to its original target will be reinvested in the businesses to strengthen its competitive position that will drive future growth. It expects to open five JB Hi-Fi stores and continue to monitor the opportunities for new The Good Guys stores. As Amazon is going to tap the retailing market share, challenges from competition cannot be completely ignored. Looking at the trading scenario, we give an “Expensive” recommendation at the current price of $28.82
 

Sales Growth Trend (Source: Company Reports)
 

Link Administration Holdings Limited (ASX: LNK)

Investment in growth areas: Recently, Ausbil Investment Management Limited and Macquarie Group Limited ceased to be a substantial holder of Link Administration Holdings Limited since December 2017. On the other hand, the group is investing deeply into areas of growth including bolt-on acquisitions. The acquisition of Capital Asset Services from Capita plc has also been completed; and post-acquisition, the business grew very well, and it has longstanding customer relationships and the business was also renamed as “Link Asset Services”. Its Earnings per share increased from 19.2 on 30 June 2016 to 34.7 as on 30 June 2017. Link is said to provide administration services for 17% of the superannuation funds under management while having 34% of the superannuation members. It is expected that the group’s operating EBIDTA margin will be up by 34% by FY2020 (28% reported in FY17 with 25% growth over FY16). Following a rise of 11% in last six months, the stock price was up 2.5% on 29 January 2018. So, by looking at overall scenario, we say that the stock is “Expensive”.
 

Growth Trend (Source: Company Reports)

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