Investment Thesis:
- High quality retailer, however trading on a 2-yr forward consensus PE-multiple of ~13.2x, much of the benefits appear to be factored in (unless there’s an upgrade cycle).
- Being a low-cost retailer and able to provide low prices to consumers (JB Hi-Fi & The Good Guys) puts the Company in a good position to compete against rivals (e.g., Amazon).
- The acquisition of The Good Guys gives JBH exposure to the bulky goods market.
- Market leading positions in key customer categories means suppliers ensure their products are available through the JBH network.
- Clear value proposition and market positioning (recognized as the value brand).
- Growing online sales channel.
- Solid management team – new CEO Terry Smart was previously the CEO of JBH (and did a great job and is well regarded) hence there are less concerns about the change in senior management.
Key Risks:
- Increase in competitive pressures (reported entry of Amazon into the Australian market).
- Roll-back of Covid-19 induced sales will likely see the stock de-rate.
- Increase in cost of doing business.
- Lack of new product releases to drive top line growth.
- Store roll-out strategy stalls or new stores cannibalize existing stores.
- Execution risk – integration risk and synergy benefits from The Good Guys acquisition falling short of targets).
Key Highlights:
- Sales increased +4.0% to $6.2bn, with comparable sales up +3.4%. Sales momentum in the 2H22 was particularly strong with 3Q22 up +11.9% and 4Q22 up 11.6% YoY. Hardware and services sales were up +5%, with comparable sales up 4.3%.
- The key growth categories were communications, driven by strong Apple iPhone 13 launch in the first half (with growth in both units and ASP), visual or TVs, small appliances (continued strength in stick vacs, robot vacs, coffee & kitchen appliances), and Smart Home. Gross profit was up +4.7% to $1,387.7m with GP margin up +15bps to 22.4% driven by strong improvements in the key categories (especially in 2H22). CODB of 11.4%, was up +21bps on the pcp. EBIT was up +4.2% to $544.9m, with margin of 8.79% essentially flat on pcp.
- Sales were mostly flat (up +0.3%) on pcp at NZ$262.4m, however the segment had a solid 2H22 with sales up +6.3% YoY (3Q22 +4.8% & 4Q22 +7.7%). Gross Profit of NZ$45.7m was down -2.1% with GP margin down -43bps to 17.4%. CODB was 12.75%, down -36bps on pcp. Underlying EBIT (excluding impact of impairments) of NZ$4.7m was down -22.1% on pcp, with margin down -51bps to 1.77%.
- The Good Guys. Sales increased +2.7% to $2.79bn, with comparable sales up +2.2%. Consistent with the rest of the group, the segment saw strong second half trading with sales up +5.5% in 3Q22 and +7.8% in 4Q22. Key growth categories included Laundry, Portable Appliances, Floorcare, Dishwashers and Visual. Online sales were up +53.7% to $397m (and now equates to 14.2% of total sales). Gross profit of $649.8m was up +6.8%, with GP margin up +89bps to 23.3% driven by improvement in key categories in the 2H22.
Company Description:
JB Hi-Fi Ltd (JBH) is a home appliances and consumer electronics retailer in Australia and New Zealand. JBH’s products include consumer electronics (TVs, audio, computers), software (CDs, DVDs, Blu-ray discs and games), home appliances (whitegoods, cooking products & small appliances), telecommunications products and services, musical instruments, and digital video content. JBH holds significant market-share in many of its product categories. The Group’s sales are primarily from its branded retail store network (JB Hi-Fi stores and JB Hi-Fi Home stores) and online. JBH also recently acquired The Good Guys (home appliances/consumer electronics), which has a network of 101 stores across Australia.
Source: Banyantree)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Investment Thesis
- Operates in a large addressable market – B2C furniture and homewares category is approx. $16bn.
- Structural tailwinds – ongoing migration to online in Australia in the homewares and furniture segment. At the moment less than 10% of TPW’s core market is sold online versus the U.S. market where the penetration rate is around 25%.
- Strong revenue growth suggests TPW can continue to win market share and become the leader in its core markets.
- Active customer growth remains strong, with revenue per customer also increasing at a solid rate.
- Successful execution in new growth pillars – Trade & Commercial (B2B) and Home Improvement.
- Management is very focused on reinvesting in the business to grow top line growth and capture as much market share as possible. Whilst this comes at the expense of margins in the short term, the scale benefits mean rapid margin expansion could be easily achieved.
- Strong balance sheet to take advantage of any in-organic (M&A) growth opportunities, however management is likely to be very disciplined.
- Ongoing focus on using technology to improve the customer experience – TPW has invested in merging the online with the offline experience through augmented reality (AR).
Key Risks
- Rising competitive pressures.
- Any issues with the supply chain, especially because of the impact of Covid-19 on logistics, which affects earnings / expenses.
- Rising cost pressures eroding margins (e.g., more brand or marketing investment required due to competitive pressures).
- Disappointing earnings updates or failing to achieve growth rates expected by the market could see the stock price significantly re-rate lower.
- Trading on high PE-multiples / valuations means the Company is more prone to share price volatility.
Key Highlights
- Group revenue was up +31 to $426m, driven by an increase in active customers (up +21% to 940k) and revenue per active customer (up +6%). Revenue per active customer growth was a function of both growth in average order values and the repeat rate. Group EBITDA of $16.2m was down -21% YoY and represented a margin of 3.8% which came in at the high end of management’s guidance range of 2-4%.
- The Management called out that macro conditions did deteriorate during the 4Q22 and they are expecting a challenging FY23
- TPW will be cycling strong previous trading periods which were the beneficiaries of lockdowns, especially the first half, hence expect a “bumpy start to this financial year.” Jul-22 trading was down -21% YoY and YTD Aug-22 trading is down 17%. However, management noted that the current trading YTD is ahead of their internal estimates (despite being down YoY) and expect the business to return to double digit growth in FY23 once lapping the extraordinary Covid lockdowns periods.
- Management upgraded their FY23 EBITDA guidance from 2-4% range to 3-5% (effectively by 2% at the midpoint). This profitability range is after TPW’s investment in thebuild.com.au, which management noted highlights the increasing operating leverage in the core business
Company Description
Temple & Webster Group (TPW) is a leading online retailer in Australia, which offers consumers access to furniture, homewares, home décor, arts, gifts, and lifestyle products.
(Source: Banyantree)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Investment Thesis
- Trading on fair value and trading multiples (based on the numbers).
- Strong FY23 guidance and outlook, but signs of management execution can be seen before upgrading recommendation.
- Strong capital position with CET1 ratio of 0.97 (within benchmark range of 0.9-1.1).
- Prospect of an uplift in margins from cost-out programmes.
- Portfolio rationalisation potentially yields better business performance.
- Potentially higher returns from investment portfolio should market conditions move in favour of current positioning.
Key Risks
- Any adverse catastrophe claims without warning with inadequate reinsurance results in lower combined operating ratios.Benefits and targets from cost-out initiatives not achieved.
- Adverse regulatory changes impacting capital positions or dividend payout ratios.
- Lower return from investment portfolios.
Key Highlights
- Strong FY23 guidance and outlook. Management guided “strong underlying business performance expected in FY23. IAG is forecasting mid-to-high single digit GWP growth and a reported Insurance margin of 14% to 16%. The FY23 guidance aligns to the aspirational goals to achieve a 15% to 17% insurance margin and a reported ROE of 12 to 13% over the medium term.
- These goals encompass the ambitions around increasing customer base by 1m to 9.5m by FY26, an insurance profit of at least $250m by FY24 in the Intermediated Australia business, further simplification and efficiencies to maintain the Group’s cost base at $2.5bn, $400m in value from DIA claims and supply chain cost reductions on a run rate basis from FY26, and higher customer interactions through the company’s digital channels”.
- Gross Written Premiums (GWP) of $13,317m was up +5.7%, driven by rate increases to offset inflationary pressures in the supply chain and natural perils, and improvement in retention rates across FY22. GWP growth in the Direct Insurance Australia business was +4.6%, accelerating in 2H22 to +5.8%, while its underlying margin remained strong at 20.5%. Management noted solid performance from Intermediated Insurance Australia business with GWP growth at +6.0% (versus +5.6% in FY21) while underlying insurance margin of +5.0% was better than the +3.9% in FY21. IAG’s NZ business saw +7.0% NZ currency GWP growth, up from +2.8% in FY21 on growth across its commercial insurance and direct brands with a volume increase in commercial motor.
- Net Earned Premiums of $7,909m was up +5.8%.
Company Description
Insurance Australia Group (IAG) is one of the two largest general insurance underwriters in Australia and New Zealand. IAG core insurance product categories are in Consumer (Motor, Home, Compulsory Third Party (CTP)) and Business (predominantly SME, Specialty Lines, Workers’ Compensation) across Australia, NZ, and Asia.
(Source: Banyantree)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
