Category: Philosophy
An investment philosophy is a coherent way of thinking about markets, how they work to put into practice. It’s a set of core beliefs that you can go back in order to generate new strategies to make it work. The investment philosophy of Investor Desk begins from the perspective that our clients are seeking a relationship which focuses on their short- and long-term goals via the provision of a strategic wealth management plan, coupled with a transparent, flexible and nimble investment solution. Investor Desk embraces a holistic view of a client’s business and personal circumstances and seeks to meet their goals and objectives through best of breed technology and financial products, delivered via a client centric relationshipand service. In the absence of a well-considered strategic wealth management plan, we believe there is less capacity to define an appropriate level of portfolio risk. We believe that asset allocation, and genuine portfolio diversifications are the key drivers of portfolio risk, and that high transparency and liquidity are important for navigating volatile market conditions.
Business Strategy and Outlook:
Material inflation is occurring in the home appliances category and presents both upside and downside risk to earnings. Management estimates prices for appliances, representing most sales at The Good Guys on estimate, have risen on average by about 8%. Higher average unit prices could bolster revenues in the second half, even if sales volumes decline as expected. However, relatively high inflation in relation to growth in consumers disposable income could weaken demand further, offsetting the positive impact. Management hasn’t yet observed any unusually high inflation in consumer electronics, the key category at JB Hi-Fi stores.
Higher online sales penetration and robust in-store sales at stand-alone stores offset the drop-in footfall to JB Hi-Fi’s mall stores. Low-single-digit group sales growth held up at similar levels to the December quarter-though continue to forecast a decline in the second half and sales decreasing by 3% in fiscal 2022.
Financial Strength:
A 2% decline in group sales and AUD 288 million in net profit after tax were pre-announced in January 2022. However, a surprise off-market buyback perhaps explains a 5% uptick in the shares following the release. JB Hi-Fi is returning AUD 250 million in funds via the buyback, following two strong years of trading which has resulted in an under-geared balance sheet and significant franking credits. The buyback price will be between 8% and 14% below the five-day volume-weighted average price, or VWAP, to April 8, 2022. A capital component of AUD 3.18 per share will be paid, with the remainder in the form of a fully franked dividend. At AUD 43.00 analysts estimate JB Hi-Fi will buy back 5.8 million shares or 5% of currently issued capital. While the expected buyback price is lower than current share prices, Australian taxpayers who have a low marginal tax rate could benefit materially from participating versus selling shares on market.
JB Hi-Fi declared a fully franked dividend of AUD 1.63 per share, representing a 65% payout ratio of first-half underlying earnings.
Company Profile:
JB Hi-Fi Limited is a specialty retailer of branded home entertainment products. The group’s products particularly focus on consumer electronics, electrical goods, and white goods through its JB Hi-Fi, JB Hi-Fi Home, and The Good Guys stores. The company primarily operates from stand-alone destination sites and shopping centre locations in Australia and New Zealand, but the online platform is becoming increasingly important.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.