Lovisa Holdings Ltd

LOV Details
Improvement in gross margin with strong FY16 performance: Lovisa Holdings Ltd (ASX: LOV) has delivered returns of 62.02% in the last six months (as at October 19, 2016). The group delivered strong FY16 results with underlying EBIT of $24.2 million in line with the company guidance. In fact, gross margin was 74% again as per the guidance. The revenue growth was of the order of 14.3% to $153.5 million over prior corresponding period (pcp). This came at the back of 5.5% like-for-like (LFL) sales growth and 11 net new stores. The group could manage the headline sales and margin performance well post some headwinds in second quarter of FY16. The group lately witnessed strong sales and this seems to mark a good beginning for FY17.
 

Number of Stores in Offshore Markets (Source: Company Reports)
 
The group had opened four stores in the UK, and the same have been benefitting Lovisa in terms of trading. LOV now expects to have rollout of more stores keeping a target of circa 10-15 in FY17. The final dividend of 2 cents per share fully franked has been lowered at the back of organic store growth. The stock is trading at higher levels and accordingly, we give a ‘Hold’ recommendation at the current price of $ 3.38 
 

LOV Daily Chart (Source: Thomson Reuters) 

Macquarie Atlas Roads Group

MQA Details
APRR Rating revision by Fitch: Macquarie Atlas Roads Group (ASX: MQA) has recently announced that Fitch has revised its Autoroute Paris-Rhin-Rhone's (APRR) long-term credit rating outlook to BBB+ with positive outlook from BBB+ with a stable outlook. Meanwhile, the group has witnessed progressive reduction of asset portfolio debt. Further, MQA is said to be well positioned to benefit from improvements in the underlying economic conditions in France and the US. Given the growth, the group announced its FY17 distribution guidance of 20.0 cps, which is an increase of 11% on FY16. For 1H16, the group’s revenue growth for APRR has been 5.6% driven by improved traffic performance, better traffic mix and higher tolls. Although MQA kicked off its annual infrastructure payment (€15.8 million expensed in January), the group could witness EBITDA growth for APRR.

 
1H16 Result Summary (Source: Company Reports)
 
MQA has a cash balance of $221 million as at 30 June 2016. The stock has fallen 8.2% in the last one month (as at October 19, 2016) and is still trading at higher levels. We maintain our ‘Hold’ recommendation on the stock at the current price of
$ 4.65 


MQA Daily Chart (Source: Thomson Reuters)

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