Consumer Discretionary Stocks to Look at PBH, GEM, BGP, JIN, AX1

  • May 28, 2020 AEST
  • Team Kalkine
Consumer Discretionary Stocks to Look at PBH, GEM, BGP, JIN, AX1

Summary

  • G8 Education: With cash preservation and efficiency improvement initiatives, G8 Education is seeking to navigate current market uncertainties and strengthen its position for future growth opportunities.
  • PointsBet Holdings is experiencing continued strong performance, with consumer shifting gambling spend online, racing turnover growth and overall product offering enhancement.
  • Capitalising on shift in consumer behaviour from traditional shopping centres to shopping online, Accent Group’s (ASX: AX1) digital sales spike in last 2 weeks of April.
  • COVID-19 measures hit the first quarter sales performance of Briscoe Group (ASX: BGP), which is expecting a significant impact in the first half revenue.

Financial markets across the globe started showing some signs of stability and recovery through the month of April 2020, primarily on the back of government stimulus packages. The impact of coronavirus pandemic differed for varied industries and measures restricting international and national commute severely impacted travel, tourism, and hotel businesses. Also, guidelines towards maintaining physical distancing and lockdowns led to the closure of several retail stores that somewhat changed the dynamics for the consumer discretionary sector.

Number of players in the consumer discretionary sector are now shifting their focus from conventional retailing to technology driven online platforms. Due to the situation wrought by COVID-19, online sales of numerous products from the consumer discretionary sector have increased in the Australian market.

Let us have a look at 5 consumer discretionary stocks – PBH, GEM, BGP, JIN and AX1.

Record Net Wins for PBH’s Australian Trading Business in Feb-March  

Corporate bookmaker, PointsBet Holdings Limited (ASX: PBH) has created a cloud-based wagering platform, delivering racing wagering and innovative sports products, including Fixed Odds Racing, Fixed Odds Sports, and PointsBetting. PBH operates in the United States and Australia.

Despite a substantial disruption due to coronavirus, the Australian trading business reported record Net Win months in February 2020 and March 2020. The Company is expecting a positive trend in the last quarter as well. For the period from 1 April to 25 May 2020, the Australian trading business registered Net Win of AUD 18.2 million. Net Win for PBH was AUD 67.2 million, from 1 July 2019 to 25 May 2020.

The continued strong performance was attributed to 3 factors including shift of gambling spend online, racing turnover growth outperformance and improvement in PointsBet’s overall product offering.

The Company also noted schedules announced for the re-commencement of key sports of Australia as announced by the Australian Football League (AFL) and the National Rugby League (NRL) to be 11 June 2020 and 28 May 2020, respectively.

As at 31 March 2020, PBH has no borrowings with AUD 149.4 million of corporate cash (majority of which is held in USD). With some of the major achievements, PointsBet delivered a strong result in the third quarter of FY2020 ended 31 March 2020. Turnover was AUD 268.7 million, an increase of 97.3 per cent from AUD 136.2 million in Q3 FY 2019. Delivered an improved app in New Jersey and introduced operations in Indiana, which is its 3rd sportsbook available online in the US.

On 28 May 2020, PBH closed the day’s trade at AUD 5.380, up 0.561%. 

GEM Boosting Position with Cash Preservation and Capital Measures  

G8 Education Limited (ASX: GEM) is a private provider of early childhood education and care. GEM, catering its services through a wide range of recognised brands and more than 470 centres across Australia, assists children to explore their potential via evidence-based and creative early learning teaching methods.  

GEM entered the year 2020 with solid results for FY2019 ended 31 December 2019; revenue was up by 7.3 per cent and underlying EBIT was in line with the guidance provided in November 2019. After investing in quality, the organic earnings grew by 3 per cent. 

G8 Education has been significantly impacted by the outbreak of COVID-19, as parents are withholding their children from attending, owing to various concerns. As at 5 April 2020, the Company’s like-for-like occupancy was tracking a decline of 9.7 per cent as compared to the level of previous year.

Federal and State Governments introduced the Early Childhood Education and Care Relief Package, which is likely to boost occupancy levels in the sector, lessening the parent’s burden during the package. Also, the JobKeeper package would aid employees at such centres.

GEM recently undertook a capital raising program, involving an institutional placement, and institutional component and retail component of the entitlement offer.

  • GEM notified the market on 14 April 2020 regarding the completion of the institutional placement and the institutional component of the entitlement offer (non-renounceable accelerated pro rata) with the issue of nearly 278 million new fully paid ordinary shares. The Company raised a total of AUD 227 million.
  • On 6 May 2020, the Company announced to have completed the retail component to raise AUD 75 million.  

 

The issue price for shares was AUD 0.80 per new share. The joint lead managers and underwriters of the equity raising were UBS AG (Australia Branch) and Royal Bank of Canada (RBC Capital Markets).

 

 

On 28 May 2020, GEM last traded at AUD 1.025, up 2.5%. 

BGP: First Quarter Sales Down 35.6% Due to COVID-19 Impacts

Briscoe Group Limited (ASX: BGP) is registered in Australia as a foreign company under the name of Briscoe Group Australasia Limited and is incorporated in New Zealand. The Group provides homeware and sporting goods. It allows Click & Collect and home delivery services.

The Group reported a decline in unaudited sales by 35.6 per cent, to NZD 97 million in its first trading quarter for the period ended 26 April 2020. However, group sales grew by 4.2 per cent in the first quarter up to and including 24 March 2020, prior to COVID-19 Alert Level 4.   

Owing to the consequences of COVID-19, the Group had undertaken following measures:  

  • Group MD, Rod Duke, not to take a salary until the end of July 2020. The senior management team agreed to a freeze in their salary increase for the same period.
  • Recently, the Board and senior management decided on a temporary cut in salaries and fees of 20 per cent, from May 2020.
  • Final dividend payment of 12.5 cents per share cancelled

 

According to Mr Duke, ongoing economic and social implications, along with other business uncertainties, would have a significant impact on the first half revenue, resulting in only a modest profit for H1.

Jumbo Interactive: Trading Update for FY2020

Jumbo Interactive Limited (ASX: JIN), founded in 1995, operates an online retail business of official government and charitable lotteries.  

With a complete focus on the sale of lotteries via. online platforms, JIN uses the latest technology and Company manages Oz Lotteries, which is one of JIN’s services for digital retailers in Australia. Jumbo processes more than AUD 150 million in a year in lottery tickets sales and manages over 2 million customer accounts.

The Company has a vision to reach ticket sales of AUD 1 billion on the Jumbo platform by FY 2022. In December 2019, JIN forayed the UK market with Gatherwell Limited’s acquisition.

In its last COVID-19 update, the Company mentioned that working from home would have a negligible impact on its operations. On the financial front, Jumbo mentioned that the business continued to generate a positive cash-flow since the COVID-19 pandemic onset. JIN had surplus cash of AUD 65.5 million and no debt, as of 29 February 2020.

Guidance:

  • Jumbo anticipates 41 large jackpots at an aggregate of AUD 1,605 million for FY 2020 as against 49 large jackpots at an aggregate of AUD 1,880 million in 2019.
  • JIN has four contracts with around AUD 140 million in potential sales volume of tickets.
  • Nearly 80 per cent and 100 per cent of the incremental NPBT is expected in FY 2021 and FY 2022, respectively.

 

Source: Company's announcements

 

On 28 May 2020, JIN closed the day’s trade at AUD 11.250, down 7.178% from its previous close.

AX1 Digital Sales Surge 220-340% in Last Weeks of April

Accent Group Limited (ASX: AX1) is a retailer and distributor of lifestyle and performance footwear. AX1 has more than 420 stores in 10 distinct retail banners. Also, Accent has distribution rights (exclusive) for 10 international brands in New Zealand and Australia.

Re-opening of Stores: After the four-week closure of AX1’s stores, the Company announced plans in late-April 2020 to progressively re-open all its stores. Accent has been keeping high standards of hygiene and other required measures at its stores.

Surge in Digital Sales: Given the shift towards online sales, the Company expects the online platform to account for a larger portion of total sales. Online sales of Accent Group increased from an average of nearly AUD 250,000 in a day in March (prior to the close of stores) to $800,000 - $1.1 million in a day in the last 2 weeks of April.

On 28 May 2020, AX1 closed the day’s trade at AUD 1.380, up 1.099% from its previous close.

Interesting Read: Uncertainties Arising from Second Wave of COVID-19 (V2.0)

 


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