Myer Holdings Limited

MYR Details

Knox Store Closure in July 2021: Myer Holdings Limited (ASX: MYR) is a leading departmental store group with ~60 department stores under its umbrella. The company sells products under various categories: womenswear, beauty, homewares, electrical goods, toys, and general merchandise. As of 2 July 2021, the market capitalisation of MYR stood at ~$307.97 million. On 31 March 2021, MYR declared its decision to close the Knox store in Victoria and stop trading activities by July 2021. The decision has been reviewed considering growing online sales and the existing number of stores near Knox. Recently, the company has rationalising its portfolio with necessary closures (Hornsby, etc.) and space reductions (Cairns, Morley, etc.) at specific properties. Currently, it is expanding at Highpoint and had planned to complete it by June 2021.

1HFY21 Key Takeaways: The company reported $1,398.0 million of sales in 1HFY21, down by 13.1% YoY. This decline is due to the store closures and lesser foot traffic during the reporting period, especially in CBD stores in Brisbane, Sydney, and Melbourne. The company witnessed a robust increase in its online sales to $287.6 million in 1HFY21, up by 71.0%. NPAT attributable to the owners was $43.0 million in 1HFY21, up by 76.3% YoY. MYR suspended dividend payments for 1HFY21. Its net cash balance improved by 98.2% YoY in 1HFY21. 

Revenue & Net Income Trend from FY17-FY20; (Analysis by Kalkine Group)

Key Risks: The company faces the impact of the COVID-19 via store closures, lower customer visitation at its large CBD stores. The subdued retail scenario creates uncertainty regarding customer demand, consumption, and spending.

Outlook: MYR’s online profit contribution has improved due to a media investment profile and rollout of 3PL generating cost efficiencies. The online channel provides a robust platform to foster growth and investment. The management has restated its vision to grow MYR as e-commerce and data- driven retailer aided by the strength of its store network. MYR focuses on driving the lower cost of doing business (CODB), exploring avenues to invest in logistics and systems, digital growth, and store expansion based on financial viability.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MYR gave a positive return of 97.43% in the past nine months and a positive return of 79.06% in the past year. The stock is currently trading higher than the 52-weeks’ average price level band of $0.190 - $0.390. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount than its peer average, considering its lower revenue, EBITDA, and comparable-store sales in 1HFY21 and the risks associated with the store closures, lockdowns, and reduced customer traffic. For this purpose, we have taken peers like Wesfarmers Limited (ASX: WES), Harvey Norman Holdings Limited (ASX: HVN), Super Retail Group Limited (ASX: SUL) and others. Considering the current trading levels, a decline in revenue in 1HFY21, decent price returns in the past nine months and the past year, valuation, we give a ‘Sell’ rating on the stock at the current market price of $0.385 (as on 2 July 2021, 2:58 PM (GMT+10), Sydney, Eastern Australia).

MYR Daily Technical Chart, Data Source: REFINITIV

Mydeal.com.au Limited

MYD Details

Appointed New CMO: Mydeal.com.au Limited (ASX: MYD) is an online retailer of lifestyle and household goods, including homewares and furniture. It has more than 6 million products offered on its platform. As of 2 July 2021, the market capitalisation of MYD stood at ~$166.94 million. On 30 June 2021, MYD announced the issue of 11.84 million options to Directors and key members as per an Equity Incentive Plan. The company has extended the vesting hurdle date of the first portion/tranche of employee options to two years from the grant date. On 24 May 2021, MYD announced the appointment of Ryan Gracie as the new Chief Marketing Officer (CMO) in the company.

Launched Apps for iOS and Android: On 4 May 2021, MYD announced the launch of native mobile applications for Android and iOS devices. The new apps are estimated to increase customer traffic on its website and enhance their experience with fast performance and more mobile-based functionalities.

Key Takeaways for Q3FY21 (March Quarter): The company posted $8.30 million of revenue in Q3FY21, up by 175.8% YoY.  MYD witnessed this growth due to an increase in customer base, repeat transactions from customers (56.1%), and private label sales. Besides, MYD reported gross sales of $171.4 million for YTD21, up by 177.4% versus $103.3 million for the entire FY20. Its active customer base increased to 883,397, up by 157% YoY as of 31 March 2021. The company held a cash balance of $45.0 million as of 31 March 2021.

Total Revenue & Net Income Trend from FY18-FY20; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological advancements and technical glitches on its website. It faces the uncertain COVID-19 retail environment and the risk of lower spending/income/ shift in customer preferences.    

Outlook: The company has recently launched its new app for Android and iOS devices. It expects customer retention to improve, the website traffic and private label sales to grow with the newly launched apps in the future. The company expects high YTD21 growth to adjust in Q4FY21 due to the COVID-19 restrictions. It reported that Q4FY21 begun positively, exhibiting gross sales growth in April YTD2021, compared to the previous corresponding period. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MYD gave a positive return of 15.92% in the past week and a negative return of 27.62% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.520 - $2.200. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium than its peer median, considering its increase in revenue, gross sales, and active customers in Q3FY21. For this purpose, we have taken peers like Temple & Webster Group Limited (ASX: TPW), Adore Beauty Group Limited (ASX: ABY), Bikeexchange Limited (ASX: BEX) and others. Considering the current trading levels, increase in revenue, private label sales, active customers in Q3FY21, higher gross sales on YTD basis, valuation, and associated risks of the COVID-19 situation and subdued retail environment, we give a ‘Speculative Buy’ rating on the stock at the current market price of AUD 0.655 (as on 2 July 2021, 1:40 PM (GMT+10), Sydney, Eastern Australia).

MYD Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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