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SUL - SUPER RETAIL GROUP LIMITED


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Ally Selby (Livewire Markets): Last up we have Super Retail Group, which is the home of brands such as Rebel and Super Cheap Auto, and many others as well. Its share price is up around 54 per cent over the past financial year. Neil, staying on you, is it a buy, hold or sell?

 

Neil Margolis (Merlon Capital): That one is a buy for us. Their earnings are also a bit inflated like JB HiFi, but it does offer more value and more protection. We also think the categories it is in are more defensive. Auto parts retailing and sports retailing is almost like a staple these days .... when your kids need new gear, they need new gear! So the categories are less risky than the ones JB HiFi operates in. They are less prone to Amazon risk. And the stock is a bit cheaper. It has always carried too much debt, but now they have managed to repay that debt. So we are actually even expecting to see some decent dividends come out of them as well.

 

Ally Selby (Livewire Markets): Don, it yields around 4 per cent per annum, and it is about to report on August 18th. What do you think investors should expect? Is it a buy, hold or sell?

 

Don Hamson (Plato): It is a buy from us. I think it will be a pretty good result. They have benefited from COVID19 with sport, home equipment, and Boating Camping Fishing, which is another one of their brands. They have done very well there. So it is a buy from us because they still look relatively cheap and they have been very good operators. They are one of our top retailers.

 

 

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and one of the winners

Super Retail Group lifted its final dividend almost three fold after delivering a 173 per cent increase in net profit to $301.0 million, boosted by demand for sports equipment and outdoor leisure goods during the pandemic. The final dividend is 55¢, compared with 19.5¢ a year ago, taking the full year payout to 88¢

 

The net profit result was in line with consensus forecasts. However, earnings before interest and tax rose 80 per cent to $476.8 million, falling slightly short of forecasts of around $485 million.

 

Sales rose 22 per cent to $3.45 billion as same -store sales across the group's four brands Supercheap Auto, Rebel, BCF and Macpac, increased by 23 per cent and online sales rose 43 per cent.

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:SUL operates several retail formats, including Supercheap Auto, BCF, Macpac, and Rebel Sport. All of these have benefited to some extent from the trends resulting from COVID: repairing cars, holidaying locally and increased exercising.

 

 

The company has managed its inventory well despite many supply chain challenges and is well placed for a reopening of the economy later in the year. Cost management has also been good, benefiting somewhat from lower rent with many landlords under pressure.

 

 

Super Retail’s strong capital position is allowing it to commit to 55-65% payout of earnings, retaining plenty to keep investing in the business. Its recently released FY21 results were ahead of market expectations and it has subsequently enjoyed earnings upgrades for FY22 and FY23; we see scope for further upgrades over the course of the year as better trading conditions and a strong online strategy more than offset any reopening pressure.

 

Alphinity

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