Stocks’ Details

Tabcorp Holdings Limited

H1FY21 Earnings Analysis: Tabcorp Holdings Limited (ASX: TAH) provides gambling and entertainment services. The market capitalisation of the company as on 17 February 2021, stood at ~$9.88 billion. The company has recently reported its results for the six months ended 31 December 2020. It has delivered resilient performance despite the COVID-19 headwinds and reported revenues of $2,870 million during the period, which is only a drop of 1.5% from the previous corresponding period. It reported statutory NPAT at $185 million. TAH witnessed decent digital growth and gaming portfolio performance in the ‘Lotteries & Keno’ segment. It also reported strong underlying performance in the ‘Wagering & Media’ segment, where digital revenues grew by 34% compared to pcp. The ‘Gaming Services’ business was impacted owing to the venue restrictions in H1FY21. The company has saved on $8 million in EBIT in H1FY21 through optimisation programs, resulting in increased efficiency.

H1FY21 Performance (Source: Company Reports)

Outlook: The company has been witnessing increased traction in demand for its services, as COVID-19 related restrictions ease out and the economy returns to the pre-COVID levels. It expects all the business units to be well-positioned for H2FY21, with cost synergies from integration anticipated to deliver $95 million of annual EBITDA savings.

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 resumed paying dividends to its shareholders and has announced an interim dividend of 7.5 cents per share which will be paid on 17 March 2021 with record date of 23 February 2021. As per ASX, the stock of TAH is trading above its average 52-weeks’ levels of $2.070-$4.740. The stock of TAH gave a positive return of ~11.92% in the past one month and a positive return of ~21.31% in the past six months. On a technical analysis front, the stock of TAH has a support level of ~$3.939 and a resistance level of ~$4.629. 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, considering its cost-saving measures, decent digital growth and gaming portfolio performance, integration synergies and decent long-term outlook. For the purpose, we have taken peers such as Aristocrat Leisure Limited (ASX: ALL), Star Entertainment Group Limited (ASX: SGR), to name a few. Considering the current trading levels, decent financial performance, growth in digital sales, positive outlook and integration of cost synergies, we recommend a ‘Hold’ rating on the stock at the current market price of $4.410, down by 1.122% as on 17 February 2021.

Vicinity Centres

1HFY21 Results Update: Vicinity Centres (ASX: VCX) is engaged in property investment, management, and development. The market capitalisation of the company as on 17 February 2021, stood at ~$7.30 billion. As per a recent update, the company has announced its H1FY21 results which have been materially impacted due to the outbreak of the COVID-19 pandemic. However, it has maintained a decent balance sheet with low gearing of 24.5% and liquidity of $2.4 billion during the period's end. There was a statutory net loss of $394.1 million during the period, mainly due to the impact of lower Funds from Operations (FFO) and a net property valuation loss of $572.4 million. However, the loss was partially offset by the benefits of lower interest savings and operational cost savings. The Board of Directors declared an interim dividend of $0.034 per share, which will be paid on 2 March 2021 with the record date of 31 December 2020.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company has witnessed increased retail activity as COVID-19 impacts begin to reduce. This has been reflected in two consecutive quarters of positive sales growth (ex-CBDs and Victoria). As per the company, it is well-positioned to benefit from improving economic conditions, aided by fiscal stimulus measures and low-interest rates.

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 witnessed an increase in sales post lifting of restrictions along with an increase in cash collection activity. As per ASX, the stock of VCX is trading below its average 52-weeks’ levels of $0.905-$2.530. The stock of VCX gave a positive return of ~23.92% in the past six months and a positive return of ~0.31% in the past one month. On a technical analysis front, the stock of VCX has a support level of ~$1.487 and a resistance level of ~$1.769. 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, considering its stable balance sheet, operational cost savings and low-interest rates. For the purpose, we have taken peers such as Charter Hall Retail REIT (ASX: CQR), Shopping Centres Australasia Property Group Re Limited (ASX: SCP), Goodman Group (ASX: GMG), to name a few. Considering the current trading levels, expected upside in valuation, increased retail activity, positive sales growth, and a decent balance sheet, we recommend a ‘Buy’ rating on the stock at the current market price of $1.580, down by 1.558% as on 17 February 2021.

Super Retail Group Limited

Business Update: Super Retail Group Limited (ASX: SUL) is engaged in the retailing of auto parts, leisure, sports and accessories. The market capitalisation of the company as on 17 February 2021, stood at ~$2.61 billion. As per a recent release the company has reported its H1FY21 results, which has been decent given its execution of omni-retail-based strategy. Group sales grew by 23.1% to $1,776.3 million during the period, when compared to pcp. There was an 139% increase in the underlying NPAT to $177.1 million. Sales were boosted by the growth in online sales to $237.4 million, an increase of 87.3% on the pcp. It ended the period with a decent balance sheet. The cash position stood at $416.8 million as on 31 December 2020. SUL’s three largest brands- SUPERCHEAP AUTO, rebel and BCF delivered strong top-line growth during the period.  Based on the performance, the company has announced an interim dividend of $0.33 per share, which will be paid on 1 April 2021 with record date of 26 February 2021 and ex-date of 25 February 2021.

Sales Growth (Source: Company Reports)

Outlook: The company plans to move to normal levels of promotional activity in the second half of FY21, as inventory levels are restored. With the expected increase in consumer spending, it has confirmed guidance for capex at ~$100 million in FY21, to invest in digital & omni-retail and also to fund store development programs.

Valuation Methodology: EV/Sales 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 is suitably positioned to reinvest in its core brands and increase its market share. As per ASX, the stock of SUL is trading above its average 52-weeks’ levels of $2.990-$12.890. The stock of SUL gave a positive return of ~18.69% in the past three months and a positive return of ~15.78% in the past six months. On a technical analysis front, the stock of SUL has a support level of ~$11.127 and a resistance level of ~$12.365. We have valued the stock using an EV/Sales 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 some premium to its peer average, considering its decent financial performance, stable balance sheet, and increased traction in its product’s demand. For the purpose, we have taken peers such as JB Hi-Fi Limited (ASX: JBH), Metcash Limited (ASX: MTS), Bapcor Limited (ASX: BAP), to name a few. Considering the current trading levels, robust financial performance, growth in online sales and decent liquidity position, we recommend a ‘Hold’ rating on the stock at the current market price of $11.810, up by 1.986% as on 17 February 2021. 

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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