Mosaic Brands Limited

MOZ Details

Q1FY21 Highlights: Mosaic Brands Limited (ASX: MOZ) is a fashion retailer group for women apparel and accessories operating in Australia and New Zealand. As on 31^st December 2020, the market capitalization of the company stood at ~$79.74 million. During Q1FY21 quarter, MOZ witnessed a 31% YoY growth in its online sales and reported an EBITDA of $8.3 million. Backed by the online trend of shopping via Facebook & Insta, MOZ expanded its core offering to over 250k SKU’s across 14 categories till the quarter-end. Over the quarter, the company’s margins grew to 67% compared to 61.8% for the pcp, driven by the growth in online sales, reduced discounting, and a 50% drop in inventory holdings. MOZ closed the quarter with a net cash position of $12.5 million.

Q1FY21 Online Sales Highlights (Source: Company Reports)

Outlook: Due to unrealistic rental requests and a permanent shift towards online purchases, the company has closed 73 stores and expects further 250 store closures by June 2021. Looking ahead, the company is focused on improving integrated customer experience across its loyalty brands. The estimated CODB (Cost of Doing Business) savings to be realised for FY21 is $18 million.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of MOZ gave a positive return of 64.28% in the past three months and a positive return of 3.87% in the past six months. The stock is currently trading lower than the average 52-weeks price level range, offering a decent opportunity for accumulation. The stock of MOZ has a support level of ~$0.594 and a resistance level of ~$1.397. We have valued the stock using Price to Earnings based illustrative relative valuation method and have arrived at a target price of low double-digit (in % terms). For the purpose, we have taken peers like Shaver Shop Group Limited (ASX: SSG), Michael Hill International Limited (ASX: MHJ), Adairs Limited (ASX: ADH) and others. Considering the current trading levels, growth in online sales, cost control measures, new product categories launched, modest outlook, and valuation, we give a ‘Speculative Buy’ recommendation on the stock at the current market price of $0.805, down by 2.425% on 31^st December 2020.

MOZ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Lovisa Holdings Limited

LOV Details

L1 Capital Pty Limited No Longer Substantial Holder: Lovisa Holdings Limited (ASX: LOV) is a retail seller of fashion jewellery and accessories. As on 31^st December 2020, the market capitalization of the company stood at ~$1.23 billion. The company recently notified that L1 Capital Pty Limited ceases to be a substantial holder with the disposal of 1.05 million voting shares in Lovisa Holdings Limited from 21^st December 2020.

Announced Acquisition of German Wholesaler-beeline GmbH: On 13 November 2020, the company announced that it is going to acquire the European retail store network of German wholesaler ‘beeline GmbH’ across six European countries. Further, the company also plans to acquire beeline France store network of 30 stores via the execution of a Put Option agreement. As per this contract, LOV will execute this deal at a purchase price of €10 (ten Euros), with beeline GmbH keeping a cash balance of €1.95 million at the completion. Including this, the full purchase price for the 7 countries amounts to €70 and an aggregate cash level of €11.82 million in the entities at the due date. The transaction will close by the end of May 2021.

Trading Update: LOV recently closed 24 stores in the UK and 40 stores in France due to restrictions by the respective governments. The company currently operates 449 stores worldwide and has opened 14 net new stores since the end of FY20. Currently, it has only 30 stores closed in Melbourne and has reopened most stores. The global comparable store sales for the 4 months post the end of FY20 was -10.2% vs comparable store sales of -32.5% of Q420. Australia and New Zealand remain the best performing markets. Though there has been an increase in the COVID-19 cases across markets, especially in Europe, LOV has all its European stores opened. The company’s total online sales rose by more than 400% on FY19 during July 2020-October 2020. The revenue for FY20 declined by 3.2% to $242.16 million due to the onset of COVID-19 and temporary store closures during Q420.  The NPAT fell by 47.8% from $37.04 million in FY19 to $19.32 million in FY20.

 FY20 Results Highlights (Source: Company Reports)

Outlook: With a decent balance sheet with a continued net cash position and undrawn cash debt facilities available, the company seems well placed to support its ongoing investment in growth. Further, the company is committed to continuing its store roll out and continue discussions with its landlords globally to create further opportunities.

Valuation Methodology: Price to Cash Flows Multiple Based Relative Valuation (Illustrative)

P/CF Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of LOV gave a positive return of 36.67% in the past three months and a positive return of 85.43% in the past six months. The stock of LOV has a support level of ~$10.10 and a resistance level of ~$13.727. We have valued the stock using Price to Cash Flow multiple based illustrative relative valuation method and have arrived at a target price with an upside of high single-digit (in % terms). For the purpose, we have taken peers like City Chic Collective Limited (ASX: CCX), Blackmores Limited (ASX: BKL), Nick Scali Ltd (ASX: NCK), and others. Considering the growth of online sales and reopening of LOV stores, the potential of new agreement undertaken with beeline GmbH, outlook for FY21, and valuation, we give a ‘Hold’ recommendation on the stock at the current market price of $11.330, down by 1.393% on 31^st December 2020.

LOV Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.