Kogan.com Ltd

KGN Details
Upgraded FY17 Outlook:  Kogan.com Ltd (ASX: KGN) has upgraded its FY17 outlook. Earlier in the prospectus, the company guided for EBITDA forecast for FY17 of $6.9 million, while the management now expects the same to be between $8 million - $9 million as compared to EBITDA of $4 million in the prior corresponding period. Management also dismissed the threat of Amazon coming to Australia which has the potential of harming their business.
 

Market Opportunity (Source: Company Reports)
 
Kogan says that if Amazon launches in 2017, the company would sell items through the Amazon platform like it does through eBay. However, given the Amazon’s pricing power, it won’t be on the most favorable terms for Kogan. Despite the threat of Amazon’s arrival, the high growth expectations make the stock a “Speculative Buy” at the current market price of $ 1.40

 
KGN Daily Chart (Source: Thomson Reuters) 

Kathmandu Holdings Ltd 

KMD Details
Strong cash position: Kathmandu Holdings Ltd (ASX: KMD) operating cash flow stands at 156.8% of its overall debt. Kathmandu generates enough surplus cash even after paying interest on its debt, which can be used to expand the business or pay dividends to shareholders. For FY16, company’s sales grew 4% to $425.6 million on same store growth of 1.6%. The gross margin improved 110 bps as compared with FY15.  The earnings before interest and tax were at $50.9 million, up 53.3% and net profit was at $33.5 million, up 64.2%. The company is investing in stores relocation and refurbishments that deliver return on capital. Kathmandu reported about refurbishment /relocation of 17 stores in FY17. Kathmandu has store network target of 180 across Australasia. Kathmandu is leveraging its brand equity and online platform to expand internationally using a capital light model. Kathmandu further updated on 15 weeks’ performance ended November 13, 2016 and has reported a 2.8% rise in sales, and a 1.4% rise in group same store sales. The gross margin was lower than last year due to currency. The company guided first half profit of FY17 which would be in line with FY16 while the success of Christmas and January promotions would be further guiding their overall financial performance. We recommend a “Buy” on the stock at the current market price of $ 1.72

 
KMD Daily Chart (Source: Thomson Reuters) 

The Reject Shop Ltd

TRS Details
Slow growth:The Reject Shop Ltd (ASX: TRS) reported just a 0.3% same store sales growth in the first quarter of FY17 as compared to 6.1% in the last year. Management attributed this to a number of problems with stock flow to stores, which resulted in both promotional and regular items having insufficient levels of stock. New stores enhanced by 2% to 348 and the management continues to work to improve product range in stores. A wide range is expected to appeal to more customers but would like to increase company’s stock and distribution issues. The management is expecting the improvement in the second quarter with improvement in operating performance. We feel the stock is “Expensive” at the current market price of $ 8.21

 
TRS Daily Chart (Source: Thomson Reuters) 

Woolworths Ltd

WOW Details
Ongoing efforts to revamp business:Woolworths Ltd (ASX: WOW) recently informed about removal of Woolworths Notes II from official quotation at the close of trading on November 29, 2016. WOW also announced about the resignation of CEO of Big W in just 10 months from appointment. Big W has pressurized Woolworths’ performance as company’s revenue fell 2.8% during 2016 with comparable sales down 3.3% while it recorded a loss before interest and taxes of $14.9 million. The business performance continues to witness softness during the 14-weeks period ended October 02, 2016. Comparable sales declined another 5.7% to previous corresponding period, in part due to clearance activities and softness in demand for apparel. The management also guided that the challenges might continue. On the other hand, WOW is in process of exiting the Home improvement business and it is trying to regain ground in the grocery market. In order to increase its focus on the supermarkets space, Woolworths could be expected to cut ties with Big W. Commenting on Q1FY17 performance, the management reported that company’s Australian Foods delivered the first positive comparable sales growth in the Q1FY17 since second quarter of 2015. The liquor business continued to gain share with growing sales nearly 4% in the quarter. The segment opened 43 net new stores. The company plans to maintain the focus on the transformation of Big W with restructuring steps taken by its earlier CEO.  We rate the stock a “Buy” at the current market price of $ 23.05

 
WOW Daily Chart (Source: Thomson Reuters) 

Wesfarmers Ltd

WES Details
Lower coal production: Wesfarmers Ltd (ASX: WES) reported a lower coal production for September quarter. Coal production was at 2,615,000 tonnes, 11.8% lower than the previous quarter while metallurgical coal production of 1,647,000 tonnes was 23% lower than the previous quarter. The decline was mainly due to wet weather conditions with rainfall being 57% higher than the prior quarter. For the quarter, food and liquor segment reported a 2.9% growth to $7,850 million while convenience reported fall of 13.7% to $1,549 million. Home improvement reported a 29.8% growth to $3,213 million.
 

2017 First Quarter sales (Source: Company Reports)
 
WES has agreed to enter into ten-year agreement with Citi, a leading global credit card provider for the distribution of Coles branded credit cards. Under the transaction, Citi will acquire existing credit card receivables and Coles will receive ongoing share of risk adjusted revenues. But, the stock is trading at an unreasonable P/E, and we rate the stock as “Expensive” at the current market price of $ 42.05

 
WES Daily Chart (Source: Thomson Reuters) 

JB Hi Fi Ltd

JBH Details
Good Guys acquisition: JB Hi Fi Ltd (ASX: JBH) sometime back announced that they finished their acquisition of The Good Guys and would be focusing in creating a market leading consumer electronics and home appliance retail group. For FY16, the company reported 8.3% growth in sales to $3.95 billion while EBIT improved 10.1% to $221.2 million and net profit grew 11.5% to $152.2 million. JB Hi-Fi solutions recorded double-digit sales and expected to deliver sales of $500 million per annum through organic and strategic acquisitions. Online sales also reported 35.8% growth in sales in FY16. The company declared a dividend of 100 cents per share for the year. The company has 194 stores at the end of June 2016 and is planning to open seven new stores in FY17. During FY16, the company signed a 6.5-year cooperation agreement with Heinemann Tax and Duty Free to be the exclusive technology partner at Sydney International Airport. For FY17, JBH expects sales to be circa $4.25 billion. We rate the stock a “Hold” at the current market price of $ 26.80

 
JBH Daily Chart (Source: Thomson Reuters)

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