FAN Details

Acquisition by Steinhoff Asia Pacific: Fantastic Holdings Limited (ASX: FAN) stock surged over 40% on October 14, 2016 as Steinhoff Asia Pacific proposed to acquire the entire stake of the group. Both the parties entered into a Scheme Implementation Deed (SID) wherein the FAN’s shareholders will get a total consideration of $3.50 in cash per Fantastic Holdings share leading to valuing FAN’s fully diluted equity at around $361.4 million. With this acquisition, Steinhoff Asia Pacific would further strengthen its portfolio. Fantastic is said to complement Steinhoff Asia Pacific business in terms of market segments, customer base and vertical integration further strengthening them in Australasia. Meanwhile, major stakeholders in the group with over 50% of the shares are positive on this proposal and even recommended shareholders to vote in the favor of the Scheme. 
 

Delivered a strong like for like sales and second half performance: FAN’s revenues surged 9.4% on a year on year (yoy) basis to $543.7 million on the back of like for like store sales growth of 11.8% across their major retail brands. Like for like sales in Fantastic Furniture enhanced 8.7% as compared to the prior corresponding period, with a strong second half performance. Fantastic Holdings reported an EBIT rise 58.3% yoy to $30.1 million on an ongoing operations basis during the period, while NPAT enhanced 62.8% to $21.4 million.

Dividend Trend (Source: Company Reports)
 

Management reported a fully franked final dividend of 7.00 cents per share, and a special dividend of 15.00 cents per share.
 

FAN business snapshot (Source: Company Reports)

Stock performance:The group had forecasted for an ongoing growth for fiscal year of 2017 driven by four new stores that were opened in FY16, coupled with their operational efficiency efforts. FAN is planning to open 15 more Fantastic Furniture sites for FY17 which would be refurbished. FAN is also growing their store network by over 15 new stores across its retail brands. For Manufacturing, the Royal Comfort Bedding factory would be relocating to a new state of the art factory in Sydney’s western suburbs late in the year. Accordingly, FAN stock generated over 35.6% in the last six months (as of October 13, 2016) and with the latest rise, the stock looks slightly expensive. Investors could start booking their profits in the stock which is trading at a high P/E. Based on the foregoing, we give a “SELL” recommendation on the dividend yield stock at the current price of $3.43
 

FAN Daily Chart (Source: Thomson Reuters)

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