Accent Group Ltd

Stronger performance for the first 20 weeks of FY19 and positive market sentiments: Accent Group Ltd.’s (ASX: AX1) stock rose 3.6% on November 26, 2018 after the company updated in the annual general meeting that for the first 20 weeks of FY19, sales have been significantly stronger than expected by the company. Previously, AX1 was projecting mid-single digit EBITDA growth in FY19. This was on the back of low single digit LFL store growth, continued strong growth in digital and growth from new stores. The company was expecting continued margin improvement and EBITDA neutral in FY19 after implementation costs for the Athlete’s Foot new corporate store acquisitions program. However, for the first 20 weeks of FY19, LFL sales is up 2.5% on last year and is on track to the company’s expectations.
 
Digital growth has been stronger than expected, which is up 88% on prior year. The company has increased the new store openings, and now is targeting more than 40 stores to open in FY19 against 30 stores originally planned. Currently, the new stores opened to date are trading ahead of expectations. The company is expecting stronger gross margin than before as it is more than 300bp ahead of the prior year YTD, with LFL margin dollar growth tracking higher than LFL sales growth. Further, the buyback of The Athlete's Foot stores is ahead of plan and 39 stores are now under corporate ownership. The company now plans to have around 50 corporate stores by the end of FY19. Therefore, as per the achievement of strong results to date in H1, and if LFL sales continue to track at low single digit growth, the company expects EBITDA for H1 to be between 15%-20% higher than the prior year. However,  the company’s outlook for H2 FY19 remains unchanged and AX1 is still projecting mid-single digit EBITDA growth for the second half. Additionally, many market analysts have upgraded the stock after the AGM given the potential it has and the run so far. Meanwhile, AX1 stock has fallen 17% in three months as on November 23, 2018 and is trading at a reasonable P/E of 15.13x. The relative strength of the stock is in a neutral zone at the moment while the average margins have improved over the years and price to book value has been below the industry. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 1.290, which is above the exponential moving average of last 20 days but below the 50 days’ average.

FY 18 Financial Performance (Source: Company Reports)
 

Super Retail Group Ltd

Delivered positive like for like growth for all the businesses: Super Retail Group Ltd.’s (ASX: SUL) stock rose 4.6% on November 26, 2018 after the market regained confidence on the stock. Further, two retailers, Accent Group Ltd and Kathmandu Holdings Ltd, also released positive trading updates recently; and this helped investors shift their sentiments towards the positive zone for SUL. Meanwhile, SUL made a strong start to the new fiscal year with all of the company’s businesses delivering positive like for like growth. Further, all the company’s businesses are now operating on a new digital platform. The company has posted strong performance of the Macpac business. The company continues with the integration of the Rays business into Macpac in line with plan and the company expects the nine Rays stores converting to Macpac Adventure Hub stores in the fourth quarter of the FY 19. Additionally, SUL maintains a dividend payout ratio of between 55% and 65% of underlying net profit after tax. On the other hand, SUL stock has fallen 27.15% in three months as on November 23, 2018, and is trading at a low P/E of 11.06x. The stock is trading at the price of level $7.52, and has support at $6.90 and resistance at $8.55. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 7.52.
 

Costa Group Holdings Ltd

Mixed Outlook: Costa Group Holdings Ltd (ASX: CGC) for CY 2019 expects earnings to be heavily skewed towards the first half of the year. However, CGC expects 2019 to be stronger than 2018, and expects overall earnings growth to be approximately 30%. Further, CGC expects to maintain its low double digit net profit growth (NPAT-S) on a traditional June financial year basis and low double digit average net profit growth over a 3 to 5-year period. Moreover, CGC has reconfirmed that the transitional half year from July to December 2018 will deliver lower earnings than the same period last year. Therefore, calendar year 2018 earnings will be lower than calendar year 2017 earnings. As a result, CGC stock has fallen 20.48% in three months as on November 23, 2018 and is trading at a P/E of 19.28x. The stock is trading at the price of $6.86, and has support at $5.90 and resistance at $7.22. Looking at the mixed scenario, we give a “Hold” recommendation on the stock at the current price of $ 6.86.
 

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