RCG Corp Ltd

RCG Dividend Details
 
On track to raise Earnings per Share: RCG Corp Ltd (ASX: RCG) reported its results for the full year ended 28 June 2015, showing underlying EBITDA of $ 21.8 million which is an increase of 27.6% over the previous year. Underlying NPAT was $ 13.7 million indicating an increase of 16% and the underlying EPS of 4.71 cents per share increased by 2.8% over the previous year. EBITDA from the existing business excluding the acquisition of Accent Group was $ 18.5 million, an increase of 8.5% over the previous year. The fully franked final dividend of 2.5 cents per share brought the total ordinary dividends for the year to 4.5 cents per share. The EBITDA guidance for FY 2016 is $ 55 million-$ 57 million which will result in an increase in the underlying EPS of between 25 % and 30%. The acquisition of the Accent Group was completed in May 2015 resulting in a regional leadership position in the retail and distribution of branded footwear with over 300 stores in Australia and New Zealand, and exclusive distribution rights to 12 leading international brands.
 


Shareholder Returns (Source: Company Reports)
 
The Athlete’s Foot reported like-for-like sales growth of 1.2% after a difficult start to the year and growth for the second half of the year was up 2.8%. Total group sales grew by 2.5% to $ 216 million and full year earnings before interest, tax and depreciation grew by 1.1% to $ 13.1 million. A full strategic review is being undertaken of the market position and consumer offerings and is expected to provide a foundation for future growth. RCG Brands continue to grow and flourish with EBITDA growing 24.3% to $ 8.6 million. Three new Merell retail stores were opened taking the total to 18 and together with the Podium Sports business, the division now operates 27 stores across Australia. The Accent Group was acquired for $ 203 million, and for the five weeks, contributed EBITDA of $ 3.3 million on the back of strong sales growth.
 

Contribution to EBITDA (Source: Company Reports)
 
The performance of the group has been impressive in spite of the difficult environment in which it operates and the positive outlook for FY 2016 of 25% to 30% EPS growth reinforces our confidence in the company’s future prospects. This is an impressive strategic stocks on the ASX and we would not hesitate to give it a Buy rating at the current price of $1.435
 
 

Austal Ltd

ASB Dividend Details
 
On the winning spree with new contracts: Austal Ltd (ASX: ASB) demonstrated record earnings in FY15 which were driven by multiple vessel programs, the resumption of dividends with a total of 4 cents per share fully franked, reduction in debt with the expectation of a net cash position by the end of FY 2016 and an order book worth $ 3 billion which secures work up to the end of the calendar year 2020. There is also a clear growth strategy targeting the significant pipelines of work available in key markets. Revenues came to $ 1.41 billion ($ 1.12 billion of previous year), EBITDA was $ 109.1 million ($ 79.3 million of previous year), NPAT was $ 53.4 million ($ 31.9 million of previous year) and net debt was significantly reduced to $ 6.1 million ($ 68.6 million of previous year).
 

Highlights (Source: Company Reports)
 
Order Book Strength: The order book includes 11 Littoral Combat Ships for the U.S. Navy (10 funded and 1 delivered), 10 Expeditionary Fast Transports for the U.S. Navy (fully funded with 5 delivered), 8 Cape Class Patrol Boats for the Australian Border Force (all eight vessels delivered), 2 High-Speed Support Vessels for the Oman Royal Navy (fully funded) and 2 High-Speed Catamaran Crew Boats. The company has built a strong position in the USA with vessels continuing to be funded and satisfactory progress and programs. US foreign policy continues to be focused on Asia-Pacific defence strategies and winning service contracts for Littoral Combat Ships and investment in the support business put the company in an excellent position to win additional work. The U.S. Navy is committed to upgrading the final 20 Littoral Combat Ships as future frigates and meet a target of 52 vessels. The recent news about Austal being awarded a US$53.5 million procurement contract for procuring long-lead time materials for the eleventh Expeditionary Fast Transport (EPF 11) for the U.S. Navy adds to the strength. This along with EPF 6 completing US Navy acceptance trials play a key role in winning new contracts.
 

High Speed Support Vessels (Source: Company Reports)
 
The company strategy to sustain the business is to maintain current revenue levels in the medium and long term through new contracts as well as additional defence contracts and existing markets. The strategy to strengthen the business is by achieving margin improvements with efficiency and increased productivity without impacting safety. The plan for diversification is to create annuity like revenue streams by building on existing expertise and focus on strategic partnerships. The business will be scaled up to cater for future Navy programs in Australia and through organic growth and select acquisitions. In fact, Federal Government’s plan to invest more than $89 billion in ships and submarines for the Australian navy over the next 20 years will help further strengthen the order book.
 
We believe that the order book position is convincing in terms of the long-term future of the company and that strategies for further growth should further strengthen this position. The stock has delivered 53.33% year to date as of November 03, 2015 and is trading at a reasonable valuation with P/E ratio of 14.38x. We would rate the stock as a Buy at the current price of  $2.28
 

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