Stocks’ Details
 

Super Retail Group Limited

Solid Top-line Growth in Segment:Super Retail Group Limited (ASX: SUL) is engaged in the operation of specialty retail stores in automotive, tools, leisure and sports categories. The market capitalisation of the company stood at $1.28 Bn as on 13^th March 2020. Despite the impact of bushfires as well as peak level of drought, the group managed to deliver total sales amounting to $1.44 billion during 1H FY20 with LFL (like for like) sales growth of 1.7%. 

Supercheap Auto and Rebel segment experienced robust growth of 3.7% and 3.6% in top-line, respectively. Both segments have given a contribution of 89% to brand EBIT. For the shareholders, SUL announced a fully franked interim dividend of 21.5 cents per share.


LFL Sales Growth (Source: Company Reports)

Focus of SUL:Going forward, the company is focused on increasing annual customer value and becoming an efficient Omni-Retailer. Moreover, it is also focused on organic growth and capital discipline. On the back of current inventory levels, the company is expecting no material impact from Coronavirus on the availability of the product in the short-term.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:During Q2 FY20, SUL attained strong gross margin momentum. During 1H FY20, four brands of SUL managed to deliver online sales growth of over 20% and increased their online market share. We have valued the stock using EV/Sales based relative valuation method, and for the purpose, we have taken peers such as JB Hi-Fi Ltd (ASX: JBH), Metcash Ltd (ASX: MTS) and Coles Group Ltd (ASX: COL) and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Hence, in light solid topline growth in Supercheap Auto and Rebel, decent margin and outlook, we give a “Buy” recommendation on the stock at the current market price of $6.850 per share, up by 5.385% on 13^th March 2020.

PointsBet Holdings Limited

Official Betting Partner of LaLiga:PointsBet Holdings Limited (ASX: PBH) through its scalable cloud-based technology platform offers innovative sports and racing betting products and services directly to clients. The market capitalisation of the company stood at $395.84 Mn as on 13^th March 2020. PBH recently announced that some of the US sporting leagues have either suspended, postponed or have decided to play games without spectators until further notice due to the impact of Coronavirus (COVID-19). 

Also, the wholly-owned subsidiary, PointsBet USA Inc., of PBH has been appointed as the Official Betting Partner of LaLiga North America. Under the scope of Agreement, the wholly-owned subsidiary would gain exposure to expanding and highly engaged audience of LaLiga throughout North America. The below picture provides an idea of financial performance for 1H FY20:


Financial Summary (Source: Company Reports)

Future Step of PointsBet: Moving forward, the company is planning to continue revenue growth and expansion into US state market access. The company will also work for the development of iGaming products.

Stock Recommendation:During 1HFY20, gross margin of PBH stood at 44.8% with YoY growth of 16.2%. Current ratio of the company stood at 5.96x in 1H FY20 as compared to the industry median of 1.00x. This reflects that PBH is in a decent position to address its short-term obligations against the peer group. During the span of one month and three months, the stock of PBH has corrected by 54.12% and 37.44%, respectively. Hence, considering the recent announcement for suspension of games, selection of wholly owned subsidiary as an official betting partner of LaLiga and corrections in the past period, we are of the view that most of the positive factors are discounted at current levels. Thus, we have a watch stance on the stock at the current market price of $2.400 per share, down by 7.336% on 13^th March 2020.

WiseTech Global Limited

High-Quality Growth in 1H FY20:WiseTech Global Limited (ASX: WTC) provides software solutions to the logistics industry globally. During 1H FY20, WTC has continued the practice of delivering high-quality growth with revenues amounting to $205.9 million and EBITDA of $62.5 million, reflecting growth of 31% and 29%, respectively on pcp. These results reflect the strength of its CargoWise business as well as strategic actions, together with increased adoption by the world’s largest logistics organisations. For the 1H FY20, WTC declared a fully franked interim dividend of 1.70 cps.


Top-line and Bottom-line Growth (Source: Company Reports)

Expected Top-line Growth for the Year Ahead:For FY20, the company is expecting revenue in the range of $420 million - $450 million, reflecting growth between 21%-29%. While EBITDA is anticipated in the ambit of $114 million - $132 million.

Stock Recommendation:During the span of the last five years, the company has invested more than $360 million in product innovation. We believe that recent growth in top-line and investment made in the last five years is likely to open headroom for more opportunities.  Net margin of the company stood at 29.1% in 1H FY20, reflecting YoY growth of 12.9%. This implies that WTC has enhanced its capabilities to convert its topline into the bottom line. Return on equity of the company stood at 7.5% in 1H FY20 with YoY growth of 2.1%. Therefore, considering the improved capabilities for converting top-line into the bottom-line and increased returns to shareholders, we give a “Buy” recommendation on the stock at the current market price of $13.610 per share, up by 5.178% on 13^th March 2020.

Amcor Plc

Integration of Bemis Business on Track:Amcor Plc (ASX: AMC) is engaged in the production and development of rigid and flexible packaging with a market capitalisation of $18.26 Bn as on 13^th March 2020. Amcor reported GAAP net income amounting to $252 million and earnings per share of 15.5 cents per share for 1H FY20. Adjusted EBIT for the period stood at $699 million, representing rise of 4.4% on constant currency terms. On 11^th June 2019, the company completed the acquisition of Bemis; resultantly, it became a global leader in consumer packaging. Currently, the integration of the Bemis business is progressing well. The company possesses a decent financial profile, which is likely to enhance further with the realization of full financial benefits from the Bemis acquisition.


Half-Year Financial Summary (Source: Company Reports)

What to Expect:For the full-year 2020, the company expects adjusted constant currency EPS growth of around 7%-10%. AMC anticipates free cash flow (before dividends) of more than $1 billion before cash integration costs of around $100 million.
Stock Recommendation:During the half-Year, the company has returned total cash of over $600 million to shareholders, which includes buyback of 21.9 million shares. Also, the company declared a quarterly cash dividend of 11.5 cents per share, which is payable on 24^th March 2020 with the record date of 4^th March 2020. Thus, considering the cash returns to shareholders and decent financial performance in 1H FY20, we give a “Buy” recommendation on the stock at the current market price of $11.100 per share, down by 2.972% on 13^th March 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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