Retail Food Group Ltd (ASX: RFG)

Downgrade to 1H18 profit: Retail Food Group Ltd.’s stock is again under investors’ smash net and plunged by 6.1% on January 09, 2018 as the group now expects statutory NPAT for the first half of FY18 (1H18) to be even below $22 million (figure earlier highlighted in December 2017). The group had earlier stated that the final result for 1H18 was dependent on the timing of the finalisation of new international master licence sales and the risk to franchise earnings. With the latest update, the group has concluded new Master Franchise Agreements for the UK with respect to the Crust Gourmet Pizza and Donut King Brand Systems. Each of the UK licences are effective December 2017, but owing to a change to an element of the commercial terms of the agreements after December 2017, the revenue derived from these transactions will now be skewed to second half and thus included in its full year results. On the other hand, the group had lately concluded negotiations to extend its three-year debt facilities of $150 million, due to mature in December 2018, into longer dated maturities ($100 million extended to facilities maturing in January 2020 and $50 million extended to facilities maturing in December 2020). With the challenging environment, RFG is targeting to manage the shortcomings, but the latest update reinforces that the beaten down stock might be able to revive itself (down 65% in one year) with the help of few catalysts (such as above) in the second half of FY18 only. We give a “Hold” on the stock at the current price of $2.32
 

Noni B Ltd (ASX: NBL)

Encouraging update: On the other hand, Noni B has come up with a buoyant trading update that reflected in its stock price with a 4.5% rise on January 09, 2018 at the back of good sales through Christmas period. Particularly, NBL’s 1H18 like-for-like sales were up 3% leading to total sales of $190 million that emanated from 642 stores (a rise from 614) while the online sales were up 4.9% of total sales. NBL now expects the earnings during the period to be about $22 million, against prior corresponding period’s underlying EBITDA of $14.3 million. While NBL has witnessed a stock price rise of about 36% in last one year, the retail sector volatility did hit the group in last three months with a fall of 9%. Nonetheless, NBL is positive on its overall performance. Meanwhile, the stock is moving towards a high level on the 52-week price gauge and looks a bit expensive than peers given the price to earnings scenario.

 
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