Accent Group Limited

Expecting to Deliver Mid-Single Digit EBITDA Growth in FY19: Accent Group Limited’s (ASX: AX1) stock climbed up 8.244 percent on August 29, 2018 after the release of full-year result for the period ended 30 June 2018 wherein total sales (including The Athlete’s Foot franchise sales) grew by 4.9 percent and amounted to $ 860.8 Mn in FY18 over the last year. It was mainly driven by the strong growth in digital sales of 131% and new store rollouts during the year. Resultantly, EBITDA increased by 16 percent to $90.8 Mn in FY18 as compared to the prior year. Underlying Net Profit After Tax (NPAT) stood $47.1 Mn in FY18, exhibiting growth of 17.9 percent on a Y-o-Y basis. Based on strong performance, the Board of Directors declared fully franked final dividend of 3.75 cents per share for its shareholders and it will be payable on September 27, 2018 with the record date of September 13, 2018. This brings the total full-year dividend to 6.75 cents per share, up 12.5% on the prior year, equating to a payout ratio of 77% for the year. Additionally, the management expects that the company will continue to strengthen its new store performance and expects to open more than 30 new stores in FY19. Moreover, the group expects to deliver mid-single digit EBITDA growth in FY19. This is expected to be achieved through low single digit LFL store growth, continued strong digital growth, new stores, stores annualizing from FY18, continued margin improvement through vertical and emerging brands and reduced discounting, which will primarily benefit margins in first half.


FY18 Financial Highlights (Source: Company Reports)

Meanwhile, the stock has risen 32.23 per cent in the past six months as at August 28, 2018 and trading at a reasonable PE level of 16.950x. Based on decent performance in FY18 and targeting to achieve mid-single-digit EBITDA growth in FY19, we maintain our “Hold” recommendation on the stock at the current market price of $1.510.
 

Baby Bunting Group Limited

Low-Cost Value Retailing Approach – Winning Business Model:Gary Levin who had an Indirect interest in the company acquired 188,000 shares through the on-market purchase with the total consideration of $458,654. Moreover, Donna Player who had an Indirect interest in the company had acquired 20,000 units through on-market trade. On the financial front, the company delivered a Net profit attributable to members of $8.68 million for FY18, which was down by 29.1 percent as compared to previous year. It was mainly impacted by the rise in operating cost in relation to the strategic investment for the future growth and price deflation through market discounting. Resultantly, RoE came in at 9.2% in FY18 from 13.1% in the previous year. Besides this, the Current ratio stood at 2.06x in FY18 which is broadly in line with the previous year. As of now, the group focuses on to grow its business by continuing to deliver to its customers the broadest range, at the best price, conveniently across multiple channels while providing excellent service and advice. Thereby, the group anticipates FY19 EBITDA to be in the range of $24.0 Mn to $27.0 Mn, representing growth of around 30% to 45% (excluding employee equity incentive expenses).


Financial Performance (Source: Company Reports)

On the other hand, we anticipate that the company has a brighter outlook ahead at the back of its low-cost value retailing approach which strengthens its online and offline trading platform to mitigate the upcoming risks. Meanwhile, the stock price has risen 67.83 percent in the past six months as at August 28, 2018 and hovering around its 52-week high price that is $2.560. Based on the further momentum expected in the stock, we maintain our “Speculative Buy” recommendation at the current market price of $2.400.

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