4 Consumer Discretionary Stocks To Look At - SUL IVC ARB JIN

  • Sep 23, 2019 AEST
  • Team Kalkine
4 Consumer Discretionary Stocks To Look At - SUL IVC ARB JIN

Overview of Consumer Discretionary Sector: Consumer discretionary sector comprises of companies that offer not so essential goods and services for the consumers but are in demand if they have sufficient disposable income to purchase them. The goods can include apparel, durable goods, automobiles, entertainment and leisure etc.

Let us now have a look at few ASX-listed stocks in the sector.

Super Retail Group Limited

Super Retail Group Limited (ASX: SUL) operates in the retail sector offering auto parts and accessories, sports equipment, apparels etc.

Dividend: The company recently announced that it will be paying a dividend of AUD 0.285 per security on 26 September 2019.

FY19 Financial Performance (year ended 29 June 2019): During the year, the company generated total group sales amounting to $2.71 billion, up 5.4% on prior corresponding period. Total group like for like sales growth was reported at 2.9%. The company generated total segment EBITDA of $314.7 million, rising 7.0% on prior corresponding period. Total segment EBIT was reported at $228.1 million, representing an increase of 3.9% on prior corresponding period. Normalised NPAT for the period stood at $152.5 million, rising 5.0% on prior corresponding period.

Financial Summary (Source: Company Presentation)

Business Highlights: During the year, the company’s core businesses delivered solid total and like for like sales growth. Supercheap Auto’s total sales increased at a rate of 3.4%. Total sales growth for rebel increased by 3.8%. BCF business and macpac witnessed total sales growth of 3.3% and 70.3% respectively.

Like-for-like sales growth was the highest for macpac at 7.3% followed by rebel at 3.3%. Supercheap Auto and BCF reported like-for-like sales growth of 2.3% and 3.2%, respectively.

Strong Cash Generation: During the year, the company generated operating cashflow of $240.9 million. The period was marked by 94% normalised EBITDA cash conversion. During the year, normalised net debt to EBITDA ratio decreased to 1.2X and the amount of net debt decreased by $36.2 million.

FY20 Trading Update: For the first 6 weeks of FY20, the group reported like for like sales growth of around 5% for BCF, 3% for Supercheap Auto and 2% for Rebel. LFL sales for Macpac reduced by around 3%. Coming to the company’s store development program, 6 new stores are being planned for Supercheap Auto. Alongside, the company is planning to shut down 1 store and undertake 12 relocations and extensions. Store development for Rebel will comprise of 3 stores being shut down along with 10 refurbishments, relocations and extensions. BCF and Macpac will see opening of 4 and 8 new stores, respectively.

The stock of the company is currently trading at a market price of $9.990, up 0.604% on 23 September 2019 (AEST – 1:16 PM).

InvoCare Limited

InvoCare Limited (ASX: IVC) operates in the funeral industry in Australia, New Zealand and Singapore.

Shareholding: The company recently updated that Vanguard Group became a substantial shareholder with 5.012% of the voting power.

Dividend: The company declared a dividend of AUD 0.175 per ordinary share with payment scheduled on 04 October 2019.

1H19 Results (period ended 30 June 2019): During the first half, the company generated sales revenue of $241.5 million, up 7.0% on prior corresponding period. Operating EBITDA for the period stood at $62.8 million, up 16.9% on prior corresponding period. Operating earnings after tax stood at $22.3 million, declining 5.2% on prior corresponding period. Reported profit during the half-year stood at $41.1 million, up 97.0% on prior corresponding period.

Financial Highlights (Source: Company Presentation)

Country-wise EBITDA: EBITDA for Australia was the highest at $52.2 million, representing an increase of 9.7% on prior corresponding period. New Zealand reported EBITDA of $6.1 million, rising 38.6% on prior corresponding period. EBITDA for Singapore amounted to $4.6 million that increased substantially on prior corresponding period.

Growth Drivers: During the first half, deaths across InvoCare’s markets reported an estimated growth of 1.2% on prior corresponding period. Operating margin for the half increased by 220 basis points. In Australia, acquisitions provided an additional 994 cases. Case average in the country witnessed an approximate growth of 2.3% through disciplined distribution and sale of broader products. In New Zealand, case volume increased due to acquisition activity. In Singapore, the estimated market share increased by 110 basis points (R12) and the number of deaths rose by 0.5% on the back of re-opening of the main funeral location.

What lies ahead? – The company’s Protect & Grow (P&G) strategy is exceeding expected EBITDA uplift against BAU. The P&G strategy increased the Net Promoter Score indicating long term success. In addition, the equity raising conducted in February 2019 allowed the company to strengthen the balance sheet while funding the future growth opportunities.

Currently, the stock of the company is trading at a market price of $13.730, down 1.223% on 23 September 2019 (AEST – 1:49 PM).

ARB Corporation Limited

ARB Corporation Limited (ASX: ARB) is engaged in design, manufacture and sale of motor vehicle accessories and light metal engineering works.

Dividend: The company recently declared a fully franked final dividend of 21.0 cents per share for the financial year ended 30 June 2019. The eligible shareholders will receive the dividend on 18 October 2019.

Financial Performance: During the year ended 30 June 2019, the company generated sales revenue amounting to $443.89 million, rising 5.0% on prior corresponding period revenue of $422.68 million. Profit after tax was reported at $57.14 million, rising 12.1% on prior corresponding period PAT of $50.97 million. Over the past 10 years, the company’s annual sales revenue has increased at an average compound rate of 8.8%. During the period, cash flows from operations stood at $50.0 million, representing an increase of 11.6% on previous year.

Sales Revenue (Source: Company Reports)

During the year, the company’s sales to the Australian Aftermarket increased by 1.6%, which now represents 62.9% of the group’s sales. Export sales increased by 9.8%, representing 29.4% of the group sales. The company reported strong growth in sales to original equipment manufacturers due to commencement of new contracts and a marginal shift of customers from the Aftermarket channel.

Outlook: The company seems well-positioned for long term success with the strong brands across the world, a strong balance sheet and growth strategies.

The stock of the company is currently trading at a market price of $19.330, down 0.821% on 23 September 2019 (AEST – 2:25 PM).

Jumbo Interactive Limited

Jumbo Interactive Limited (ASX: JIN) is engaged in the business of retail of lottery tickets through the internet and mobile devices.

Dividend: On 20 September 2019, the company paid a dividend amounting to AUD 0.2150 per ordinary share.

FY19 Performance (period ended 30 June 2019): In FY19, the company witnessed a surge in customer engagement from a new software platform. The results included addition of 444,044 new accounts, increasing by 106.6% on prior corresponding period (pcp). Active customers during the year increased by 74.1% to 761,863. Revenue for the year was reported at $65.2 million, up 64.0% on prior corresponding period revenue of $39.8 million. Net profit before tax stood at $38.2 million, depicting a substantial increase of 123.5% on pcp. During the year, basic earnings per share amounted to 43.9 cents, up 93.4% from 22.7 cents in pcp. Dividend per share (dps) stood at 36.5 cents, rising 97.3% on prior corresponding period dps of 18.5 cents. During the year, the company generated operating cash flow of $39.1 million and reported free cash flow of $13.3 million.

FY19 Highlights (Source: Company Reports)

The company reported a strong start to FY20 with total transaction value increasing by 60.7% in July 2019, as compared to pcp. The period was marked by 5 large jackpots with an average value of $58 million, as compared to 7 jackpots at an average of $32.1 million in pcp. TTV increased continuously on the back of charitable lotteries, Alongside, the company witnessed continued growth in revenue from SaaS services.

Currently, the stock of the company is trading at a market price of $24.990, up 4.736% on 23 September 2019.


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