Is Market Watching JBH Shares Closely?

  • Apr 13, 2019 AEST
  • Team Kalkine
Is Market Watching JBH Shares Closely?

JB Hi-Fi Limited (ASX: JBH) is engaged in the retail business of consumer products, offering various brands with a gauge on consumer electronics, software, white goods and appliances.

1HFY19 Performance: JBH reported a net profit after tax of $160.1 million, up 5.5% (pcp) as compared to $151.7 million in H1 FY18. Total sales for H1 FY19 came in at $3.8 billion against $3.7 billion in H1 FY18, recording a growth of 4.2%. Group EBIT posted a growth of 4.8% from the pcp to $236.6 million, and EPS was up 5.4% to 139.4 cps. The company delivered record sales and earnings in the first half on the back of growth coming from all business segments with JB HI-FI Australia, JB HI-FI New Zealand and The Good Guys. JBM declared a fully franked interim dividend of 91 cents/share, which is 5.8% higher (pcp), representing 65% of NPAT. Management believes that with 65% interim dividend payout ratio, the company’s capital is well managed across profit distribution to shareholders, debt repayment and appropriation of profit for the future.

Looking at the segment-wise performance, JB HI-FI Australia performed well with further expansion in sales growth, gross margins and lower depreciation. Gross margins for the company were at 22.1% along with EBIT margins flat at 7.4%. The key growth categories for JBH were communications, audio, fitness and connected technology, and games hardware.

JB HI-FI New Zealand recorded total sales of NZD131.8 million, up 5.8% with comparable sales up 12.6%, which improved significantly. Key drivers for the higher sales growth were largely communications, games hardware and fitness and accessories. Online sales in New Zealand grew significantly at 65.4% to NZD7.9 million or 6% of total sales. The growth was driven by the improved online platform launched in August 2017. EBIT was NZD1.1 million, up NZD1.1 million on the pcp.

The Good Guys’ sales numbers amounted to $1.13 billion, witnessed a growth of 2.8% with comparable sales growth at 1.5% driven by refrigeration, laundry, floorcare, televisions, communications and computers. Growth for online sales was satisfactory, however, down 2.4% to $70.7 million or 6.3% of total sales due to a decline in third-party marketplace sales. Gross margin stood at 20.6%, slightly down on the pcp. Sales growth, combined with lower depreciation as significant pre-acquisition IT investment is now fully amortised, resulted in solid EBIT growth with margins at 3.9%.

Revenue growth and maintaining a market share will be the prime focus of the group considering the competitive surroundings. The company has clearly mentioned the roadmap for the second half of FY19 in terms of the numbers and will centralise all the business strategies to achieve the set targets.

Management expects to open five JB HI-FI Australia stores; four in H1 FY19 and one in H2 FY19. The opening of the 2 The Good Guys stores is also planned in first half of FY19. Keeping the profitability per store in mind, JBH will close two JB HI-FI Australia stores in H2 FY19 and one JB HI-FI New Zealand store in H1 FY19. Management anticipates total sales for the group to be at circa $7.1 billion, including: (a) JB HI-FI Australia $4.73 billion; (b) JB HI-FI New Zealand (NZD) $0.24 billion; and (c) The Good Guys $2.15 billion. With the expected sales, group NPAT will be in the range of $237 million to $245 million, an upside of 1.6% to 5.1%, (pcp).

At CMP of $25.080 on 12th April 2019, the stock is available at P/E of 11.85x of its earnings with a market capitalisation of $2.86 billion and annual dividend yield at 5.5%. The stock currently trades near its 52-week high price. The stock has gained 15.48% in the last three months.


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