Baby Bunting Group Limited

BBN Details
 
FY20 Operational Guidance Remained Unchanged: Baby Bunting Group Limited (ASX: BBN) is engaged in Baby Bunting retail stores and its online store, babybunting.com.au. BBN is one of the leading specialty retailers of baby goods, primarily catering to parents with children from newborn to three years of age and to-be parents. Products range includes prams, cots and nursery furniture, car safety, toys, babywear, feeding, nappies, manchester and associated accessories. On 08 October, BBN informed about new substantial holder, named, Vinva Investment Management with a voting power of 5.19%.

Key Highlights of Annual General Meeting (AGM) and FY19 Results: BBN cited that comparable-store sales growth came in at 3.1% on year-to-date (as on 6 October 2019), reflecting the cycling of unusual trading conditions in Q1FY19 as a result of the closure of Babies R Us and the clearance activity of few high-end cots and Prams in September 2018. The company’s online sale year-to-date was affected by technical issues, associated with the transition to the new web platform. Recently, BBN reported its FY19 results wherein total sales came in at $368.0 million, up 21% on y-o-y. Net profit for the year stood at $12.4 million, up 43.3% from FY18. EBITDA during the period came in at $24.1 million, up 37.4% on y-o-y basis. The performance was driven by strong comparable-store sales growth of 8.7% on y-o-y basis. The company launched Nuna brand during September 2019, which was internationally awarded for quality product design and one of the bestselling baby brands in the USA market. The company introduced 4baby brand refresh and a new soft-goods private label brand ‘Bilbi’. During FY19, online sales (including Click & Collect) grew 46% on y-o-y basis, representing 11.8% of the total revenue. Overheads, during the period, were 5.7% of sales, reflecting investment in new support office roles to support growth.
 

FY19 Financial Highlights (Source: Company Reports)

Outlook: The Management expects Pro forma NPAT to come in within the range of $20.0 million to $22.0 million in FY20, with no upgradation from its previous guidance. Pro forma EBITDA as valued under old lease accounting standards, is expected to be in the range of $34 million to $37 million in FY20. Pro forma EBITDA range was maintained as per the previous guidance. The Management expects comparable-store sales growth at mid-single digits for FY20. The company expects to launch Private Label pram ‘Panorama’ in October 2019.

Stock Recommendation: The stock of BBN is quoting at $3.50 with a market capitalization of ~$470.36 million. The stock is trading towards the upper band of its 52-week trading range of $1.95 to $3.76. The stock has generated returns of 66.82% and 63.16% during the last three months and six months, respectively. EBITDA margin of BBN for FY19 came in at 6.6% as compared to the industry median of 6.8%. ROE of the Business during FY19 stood at 13.1% as compared to the industry median of 14.3%. The stock is available at a price to earnings multiples of 37.96x on trailing twelve months (TTM) basis as compared to the industry median of 13.1x.  The stock has generated decent returns in the recent past on account of good operational performance. As per the recent updates, FY20 operational guidance remained unchanged. Considering the aforesaid factors, price movements, valuation, margin comparison, we believe that most of the positives have been factored in at the current juncture. Hence, we advise investors to book profit at the current juncture and recommend a “Sell” rating on the stock at the current market price of $3.50, down 5.914% as on 08 October 2019.

 
 BBN Daily Technical Chart (Source: Thomson Reuters)

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