Nick Scali Limited


NCK Details

Modest sales growth expected in FY17: Nick Scali Limited (ASX: NCK) has reported a 53.1% increase in net profit after tax (NPAT) to $26.2 million in FY 16, beating its earlier guidance of NPAT between $24-26 million against FY 15. Additionally, NCK would launch Nick Scali Furniture brand into New Zealand with 3-4 stores expected in FY18. NCK’s network target is over 75 stores for both Australia and New Zealand. NCK has successfully entered the WA market by opening four stores.
 
 

FY 16 Financial Performance (Source: Company Reports)
 
On the other hand, NCK expects modest sales growth in FY17 as compared to FY16. Moreover, the group’s solid FY16 performance drove their stock by 31.5% in the last three months (as of September 13, 2016), placing them at slightly higher levels. We give an “Expensive” recommendation on this dividend yield stock at the current price of $5.80
 

NCK Daily Chart (Source: Thomson Reuters)
 
Myer Holdings Ltd


MYR Details

Decent result and management of stores portfolio: Myer Holdings Ltd (ASX: MYR) released its full year result which seems to be in line with consensus and reported a 2.9% rise in sales to $3.3bn on a comparable store basis. The group’s profit was at $69.3m (pre implementation costs) while earnings were within the $66m-$72m guidance.
 

Progress on New Myer Target Metrics (Source: Company Reports)
 
MYR earlier announced about exiting its stores located at Wollongong in October 2016 and Orange in New South Wales in January 2017 as a part of New Myer strategy, which is aimed to deliver profitable growth. On the other hand, MYR is accelerating the rollout of New Myer initiatives which is leading to increased costs and capex. These costs include the major refurbishment at Warringah, which is due to reopen before Christmas 2016. The stock is trading at unreasonable valuations and has a very low dividend yield. Accordingly, we give an “Expensive” recommendation on the stock at the current price of $1.275
 

MYR Daily Chart (Source: Thomson Reuters)
 
Woolworths Limited


WOW Details

Cancelled Giralang supermarket plan:Woolworths Limited (ASX: WOW) has cancelled Giralang supermarket plan and the residents blamed the ACT Government behind the decision. As a result, the stock fell over 4.2% in the last one month (as of September 14, 2016). On the other hand, we believe the group would be able to withstand this given its long term expertise in the domain.
 

FY 16 Financial Performance (Source: Company Reports)
 
WOW has implemented the new operating model to further increase the accountability into the business. In addition, WOW is seeing the clear signs of progress in the Australian Supermarkets. We believe investor’s need to leverage the recent fall in the stock while we maintain our “Buy” recommendation on this dividend yield stock at the current price of $22.49
 

WOW Daily Chart (Source: Thomson Reuters)
 
Wesfarmers Ltd


WES Details

Agreement with Woolworths:Wesfarmers Ltd’s (ASX: WES) home consortium has signed the agreement with Woolworths for the acquisition of Masters Property portfolio consisting of small number of properties. In addition, WES reported a 5.7% growth in the operating revenue to $66 billion in FY 16. On the other hand, they reported an 83.3% fall in the net profit after tax to $407 million. There is a strong performance in the retail portfolio & WesCEF but this could not offset the losses at Target & Resources.
 

FY 16 Financial Performances (Source: Company Reports)
 
The FY16 operating cash flows declined 11.2% to $3,365m due to the higher working capital investment. WES has witnessed fall in coal price leading to low realization in FY 16. Therefore, there was a significant decline in earnings contribution from the resource division. Moreover, WES stock is trading at an unreasonable P/E and hence, we give an “Expensive” recommendation on this dividend yield stock at the current price of $42.86
 

WES Daily Chart (Source: Thomson Reuters)
 
JB Hi-Fi Limited


JBH Details

Acquisition of The Good Guys:JB Hi-Fi Limited (ASX: JBH) stock surged over 43.5% during this year to date (as of September 14, 2016), driven by the group’s performance coupled with their efforts to acquire The Good Guys.  JB Hi-Fi has announced for the takeover of The Good Guys for a cash consideration of $870 million (11.7x EV/FY16 pro forma normalised EBIT pre-synergies). This move is expected to yield net synergies in the range of $15 million to $20 million per year to the combined business after a three-year integration period (excluding one-off implementation costs of between $10 million and $12 million in the first 12 months).
 

Scale in Home Appliances (Source: Company Reports)
 
Meanwhile, The Good Guys have been said to consider raising the money through an IPO. Despite this, JBH is expanding their penetration and planning for 58 HOME stores at the end of FY16 and 75 HOME stores at the end of FY17. The stock has been in a trading halt until September 16, 2016.
 

JBH Daily Chart (Source: Thomson Reuters)

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