Noni B Limited

Acquisition to Boost Online Sales:Noni B Limited (ASX: NBL) is engaged in retailing of women’s apparel and accessories. On 21 November 2019, the company informed that it has agreed to acquire a 50.1% stake in EziBuy Limited, which is subject to shareholders’ approval.

FY19 Operating Performance for the period ended 30 June 2019: NBL released its FY19 full-year report, wherein the company reported a 136.8% y-o-y increase in revenue at $881.92 million. The company reported a profit after tax at $8.13 million as compared to $17.293 million in FY18. The company reported $9.13 million of restructuring costs before tax and $10.6 million of additional depreciation relating to acquired brands. The business reported a higher contribution from online sales at 9.8% as compared to 5.8% in FY18. Total number of stores at the end of the year stood at 1,379.


FY19 Income Statement Highlights (Source: Company Reports)

Outlook: NBL will build on and further strengthen the customer-relationship by engaging the business on all platforms offering a growing selection of products. The company expects underlying EBITDA in FY2020 to be in-line with market consensus of $75 million. NBL is looking forward to unlocking the potential through higher analysis of business data, store expansion and online strategies, and expects further revenue and earnings growth in FY2021 and beyond.

Stock Recommendation: The stock of NBL is quoting at $2.46, with a market capitalization of ~$247.14 million. The stock is trading near the lower band of its 52-weeks trading range of $2.29 to $3.40. The stock has delivered returns of 2% and -6.93% in the last three-months and six-months, respectively. The recent acquisition of EziBuy Limited is likely to aid the business with an addition of $200 million of online sales, representing 20% of the total group revenue. In addition, it will provide access to a database of over 2 million loyal customers, primarily from New Zealand. The stock is available at an enterprise value to EBITDA multiple of 4.2x on trailing twelve months (TTM) basis as compared to the industry median of 8.0x. At the current market price, EV to Sales multiple of the stock stands at 0.3x on TTM basis, as compared to the industry median of 0.8x. Considering the aforesaid facts, price movements and current trading levels, we recommend a ‘Buy’ rating on the stock at the current market price of $2.460, down 3.529% on 21 November 2019, taking cues from the acquisition of EziBuy  Ltd and AGM 2019.
 

City Chic Collective Limited

Product Expansion to Drive Business Growth: City Chic Collective Limited (ASX: CCX) is a clothing company, which focuses on Retailing of women's apparel across major geographies.

FY19 Financial Highlights for the period ended 30 June 2019: CCX reported its FY19 full-year financial results wherein, the company reported revenue from continuing operations at $148.43 million as compared to $131.87 million in FY18. The company reported comparable sales growth of 12.2% on y-o-y basis. Underlying EBITDA during FY19 stood at $24.9 million, up 25% on y-o-y basis. EBITDA margin during FY19 came in at 16.8% as compared to 15.1% in FY18. NPAT for the year amounted to $14.26 million as compared to $14.96 million in FY18. As a percentage of sales, online sales increased from 36% in FY18 to 44% in FY19, with strong growth in Australia and the USA. The Online channel represented the highest margin channel for the company. During the year, the company opened nine stores, including three larger format stores, all of which performed ahead of expectations. During the year, the company acquired ‘Hips & Curves’, a small USA online retailer of plus size intimates for US$2 million.


FY19 Income Statement (Source: Company Reports)

Guidance: For FY20, the company will be looking for new store roll-out in Australia and New Zealand and will focus on the conversion of large format stores. In addition, the company will undertake product expansion across lifestyle and categories and is planning to expand into new segments across the plus-size markets. The company will focus on expanding its US segment through the acquisition of ‘Hips & Curves’. Further, the business is looking forward to adding new partners across the northern hemisphere.

Stock Recommendation: The stock of CCX is quoting at $2.680, with a market capitalization of ~$528.65 million. The stock is trading close to the upper band of its 52-week trading range of $0.884 to $2.920. The stock has generated returns of 52.78% and 54.49% in the last three-months and six-months, respectively.  Completion of the sale of the five Specialty Fashion brands transformed the company from a retail conglomerate to a pure play on the women’s plus size apparel market. This market is huge and is estimated to be worth over $1 billion in Australia, $30 billion in the USA and around $50 billion globally. Considering the above scenario and decent price movement in the last six months, we have a watch stance on the stock at the current market price of $2.680, down 2.545% as on 21 November 2019 and suggest investors to wait for better entry levels.

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