2 Stocks under Re-making Strategy - FBU, MYR

FBR: The stock of New Zealand based builder and construction partner, Fletcher Building Limited (ASX: FBU) has witnessed a drastic fall of 30.46% this year with $6.586 price at 2018 beginning. The performance in last six months is equally disappointing as evidenced from a poor return of -28.6%.

As per recently released 2018 financial results, nation’s largest construction firm Fletcher Building witnessed revenue growth and solid sales performance across core businesses in Australia and New Zealand. But these gains were more than offset by increased input costs and difficult trading conditions in export markets of its Roof Tile Group.  Â

Considering these developments, the Fletcher group announced the adoption of a five-year growth plan to divest its non-core international business. The company aims at focusing on its flagship business of building homes and infrastructure and supplying construction-related products across New Zealand and Australia.

Fletcher Building today announced the signing of an agreement to sell the Formica Group, surface solution provider, to Broadview Holding BV for a sale price of US$840 million (NZ$1,226 million), subject to necessary approvals. The company is confident of Broadview, leading player in the laminates industry, being the right buyer for Formica Group. The sale is expected to be finalized by 2019 year-end, subject to necessary regulatory approvals.

Post the announcement, the company’s share price soared by 2.4% and is currently trading at $4.690 as compared to the previous close of $4.580.

Fletcher recently completed the sale of Roof Tile Group business to Canada’s IKO group for $60 million. The company’s management believed the resultant non-cash loss of $15m to $20m from this transaction would not impact its underlying earnings outlook.

The company anticipates profitability based on the success of its business restructuring strategy. Considering this, Fletcher’s management has confirmed its intention to reinstate dividends upon finalizing semi-annual results in February 2019.

MYR: The scrip price of Myer Holdings Ltd (ASX: MYR) has been on a downtrend this year with a poor YTD return of -37.21%. In the last three months, the stock price has fallen by 37.2%, with today’s close price of $0.395 (down by 2.5%).

Australia’s largest department store group, Myer Holdings operates 62 department stores across the nation.

The Myer group recently shared disappointing annual financial performance for FY2018. The company reported a sales decline of 3.2% to $3,100.6 million and a 2.7% drop on a comparable stores business. The gross operating profit declined by 2.9% to $1,184.4 million. An increase of 1.5% in cost of doing business was also observed.

As part of re-defining business strategy, Myer group announced signing a binding agreement in September this year, with existing lenders to refinance banking facility until 2021. This will provide support to management to substantially improve financial performance.

The company outlined “Customer First Plan” to enhance customer satisfaction and improve business performance. To continue strong growth of store’s online platform, the company recently launched “The Myer Market”, an online lifestyle destination.

The company has adopted major board restructuring recently to bolster sales and financial performance. The board maintains focus on aligning remuneration practice with the shareholders’ interests.

With the redefined business strategy to improve business growth and sustainability, the two stocks FBU and MYR are worth keeping a close eye in the near term. Further, it will be key to watch how investors turn their attention towards these two beaten down stocks.


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