Westfield Group (WDC) is the world’s largest listed retail property group was listed as a share to buy in our traders report on Tuesday April 16th. The group has a global portfolio, comprising 105 shopping centres across five countries.

It also manages all aspects of shopping centre development, from design and construction through to management and marketing.

FY12 results

WDC reported an 18.3% rise in FY12 net profit to $1.7 billion. Funds from operations – which strip out asset revaluations – climbed 6% to $1.5 billion.

Net property income rose 7%, with the UK contributing a large part of the growth as the London Olympics led to an increase in shopping centre traffic.

There was positive 2H momentum in the US, with net operating income growth exceeding previous guidance as specialty sales rose due to a record number of shops opened.

Another highlight was the high occupancy rates. Global occupancy was 97.8%, up 30 basis points on-year with most of the growth coming from the US portfolio.

WDC also extended its share buyback for another 12 months, a move likely to provide a good degree of support for its share price.

Shedding non-core assets

In the latest example of the group optimizing its asset structure, WDC sold its 49.9% stake in six Westfield shopping centres in Florida, USA, to O’Connor Capital Partners.

The sale is expected to bring in net proceeds of US$700 million and will result in a joint venture between the two firms, with Westfield retaining its role as property, leasing, and development manager.

By shedding non-core assets, WDC is freeing up capital to help fund its $12 billion development pipeline and engage in capital return initiatives such as the expansion of its buyback program.

Outlook

Last week WDC commenced a plan to redevelop Westfield Garden City at Mt Gravatt, Queensland.

The $400 million project will be jointly funded by WDC and Westfield Retail Trust (WDC). The redevelopment will include a full line Myer department store, a new Target store and over 100 new specialty retailers.

The Mt Gravatt project is expected to yield 6.75% – 7.25%, in line with the yield generated by WDC’s other development projects in the US and Australia.

WDC commenced $1.4 billion in new projects during 2012, and forecast another $1.25 – $1.5 billion in new projects during 2013. The overall development pipeline now stands at $12 billion.

In our view, the group’s selling of non-core assets and investment in high yielding projects will increase the return from its assets and ultimately translate into further share price appreciation.

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Myer Holdings (MYR) is one of Australia’s largest department store groups, targeting a wide spectrum of consumers. The company has a national network of stores, retailing designer, national, and international fashion and apparel for men, women and children.

MYR focuses on its retail presence and execution, and also operates a consumer loyalty program.

Improving consumer environment

MYR has been operating in an extraordinarily tough consumer environment in recent years, but conditions look to be easing.

In the first four months of 2013, the Westpac Consumer Confidence Index has risen to its highest level since December 2010. Since last October, consumer confidence has risen 11.5%.

It appears the RBA’s 2012 interest rate cuts are beginning to have a noticeable impact on confidence, leading to improved operating conditions for retailers like MYR.

1H13 results

Last month, MYR mentioned that its 1H13 net profit increased by 0.7% from the prior corresponding period to $87.9 million. An interim dividend of 10 cents was declared.

CEO, Mr. Bernie Brookes, said that, “we are pleased that the positive sales trend continued during the half, with the second quarter representing our third consecutive quarter of positive comparative store sales growth.

On a comparable store sales basis, 1H13 sales increased by 1.4% on the prior corresponding period to $1.7 billion.

The result was attributed to the good performance of its menswear, cosmetics, womenswear, fashion accessories, and childswear divisions.

Despite a challenging environment, MYR managed to grow same store sales by focusing on things it can control like improved customer service, new stores and refurbishments, and a better online offering.

The group’s investment in its own brands also appears to be paying off, with the positive customer reception helping to drive a 23 basis point increase in gross margin from 1H12.

On a one year forward P/E basis MYR is trading on a multiple of just 13.1x, representing a 13.5% discount to the median of its closest peers.

Outlook

MYR has provided three straight quarters of comparable store growth and we expect this trend to continue.

Sentiment towards retailing stocks is improving, with consumer confidence rising to multi-year highs thanks in part to the RBA’s rate cutting cycle.

MYR responded to the challenging retail environment by investing in its own brands. The 1H13 results showed solid demand for MYR’s brands, and we think this will translate into continued margin expansion.

The stock is still trading at relatively inexpensive multiples, offering good value around current prices.

Myer was issued as a share to buy to our members on April 9th, if you would like further information you can sign up for FREE share tips and access all our research files on not only MYR but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

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JB Hi-Fi (JBH) is a chain of electrical stores, selling leading brands of hi-fi, speakers, televisions, DVDs, cameras, car sound, home theatre, computers, white goods, portable audio and a variety of music, games and movies.

The company has been able to grow its sales over the last 5 years in what can only be described as one of the most difficult trading conditions for retailers in over 20 years.

JBH’s strategies for growth are simple: increase the number of stores, increase sales, and through that, increase profit.

JBH’s expansion is not only in the Australian market, but also in New Zealand. Since entering the New Zealand market in early 2007, it has opened 14 stores.

1H13 Results

JBH’s 1H13 results impressed on several fronts. Sales for the six months to December 31 were $1.81 billion, up 3.1% on the prior corresponding half.

Net profit was $82.1 million, up 3% on the 1H12 result. The group also declared an interim dividend of 50 cents per share, fully franked. This equates to a solid yield of around 6.5% at current prices.

Perhaps the most surprising number released by JBH was its gross margin, which rose by 28 basis points. This number is made even more impressive when it is compared to competitor, Harvey Norman, whose gross margin dropped 260 basis points over the same period.

Consumer environment

The operating environment for the retail sectors has been subdued over the last few years, but this appears to be abating. The latest release of the Westpac Consumer Sentiment survey, showed the consumer sentiment index rising 2% to 110.5 in February.

It is the highest level the index has reached since the end of 2010. A reading above 100 indicates that more consumers are optimistic about the economy rather than pessimistic, with the index having been in the positive territory for the past five months.

There are likely a few reasons for the uplift, with the RBA cutting the cash rate to 1.75% between November 2011 and December 2012, probably the key reason.

Looking ahead

JBH’s 1H13 results showed sales growth and more importantly, expanding margins. While these expanding margins initially helped the company’s profitability, they will be more significant when industry wide sales growth return to trend.

Retail sales figures in January already have hinted of such a return, with an increase of 0.9% from December. Confirming these retail numbers, JBH noted that its sales climbed 11.7% during January (4.2% like-for-like sales growth).

With the consumer sentiment reading at all-time highs and sales growth starting the year off with such a strong number, we see a solid result ahead for JBH, which should translate to further share price appreciation.

JB Hi-Fi was issued as a share to buy to our members on March 27th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only JBH but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

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Super Cheap Auto (SUL) is Australasia’s leading retailer of automotive and boating, camping and fishing products.

The company boasts a number of brands, including Super Cheap Auto, BCF Boating/Camping/Fishing, GoldCross Cycles, Ray’s Outdoors and Rebel Sport.

1H13 Results

The group’s recent 1H13 results were a solid improvement on the 1H12 results.

Revenue rose 37% to $1.04 billion, helped by strong Like-for-like (LFL) sales. LFL sales for SUL’s Supercheap Auto division were up 5.2% while its Leisure and Sports divisions sales rose by 2.8% and 8.3% respectively.

The group’s underlying earnings EBIT and NPAT increased 35% and 30% respectively compared to the prior corresponding half. On the back of the strong result, the group was able to increase its interim dividend by 31% to 17 cents per share, fully franked.

Operating metrics

SUL has a history of delivering healthy returns, with its return on equity (ROE) averaging 19.2% since 2008. The group has also grown its half-year revenue by an average rate of 18% over the last five halves.

Moreover, while many retailers have been suffering margin contraction, SUL’s EBIDA margin has risen over 140 basis points. These are extremely impressive results given the tough retail-operating environment over the last few years.

Looking ahead

Going forward, we expect SUL to deliver more robust revenue and earnings growth. The company has shown solid same stores sales growth, with an ability to control costs through supply chain initiatives.

We believe SUL’s good supply chain management will be essential, especially given the company long-term aim to open another 40 Super Cheap Auto stores, 44 more stores in Leisure and 59 more stores in Sports.

Overall, we see continued growth for SUL’s business, which should translate to further gains for SUL’s share price.

Super retail group was issued as a share to buy to our members on March 25th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only SUL but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

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Westfield Group (WDC) is the world’s largest listed retail property group. The group has a global portfolio, comprising 105 shopping centres across five countries.

It also manages all aspects of shopping centre development, from design and construction through to management and marketing.

FY12 results

Today WDC reported an 18.3% rise in FY12 net profit to $1.7 billion. Funds from operations – which strip out asset revaluations – climbed 6% to $1.5 billion.

Net property income rose 7%, with the UK contributing a large part of the growth as the London Olympics led to an increase in shopping centre traffic.

There was positive 2H momentum in the US, with net operating income growth exceeding previous guidance as specialty sales rose due to a record number of shops opened.

Another highlight was the high occupancy rates. Global occupancy was 97.8%, up 30 basis points on-year with most of the growth coming from the US portfolio.

Buyback extended

WDC declared a final distribution of 24.5 cents, bringing the full year distribution to 49.5 cents. This was a 2.3% increase on FY11’s distribution. The group forecast an FY13 distribution of 51 cents, representing a yield of 4.5% at current prices.

Although this is not as high as some other high yielding stocks in the market, WDC did extend its share buyback for another 12 months, a move likely to provide a good degree of support for the share price.

Outlook

WDC commenced $1.4 billion in new projects during 2012, and forecast another $1.25 – $1.5 billion in new projects during 2013. The overall development pipeline now stands at $12 billion, providing plenty of scope for WDC to continue delivering steady profit growth.

With the US economy continuing to heal from the GFC, we expect stronger retail activity in the group’s largest market. In our view that will help drive the share price higher in the near-to-medium term.

This article was distributed to our members on February 27th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only WDC but all our current trading ideas. Simply click here and starting trading today.

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The Reject Shop (TRS) is a discount variety retail company, targeting Australian consumers through low price points, bargain-purchasing and convenient shopping locations. As of 30 June 2012, TRS had 239 stores in Australia, with plans to open another 40 in FY13.

At these stores the company offers a wide variety of general consumer merchandise, with a focus on everyday needs, such as toiletries, cosmetics, homewares, personal care products, hardware, basic furniture, household cleaning products, kitchenware, confectionery and snack food.

The company has two key advantages that many of its mid-to-upper market rivals don’t – a strong AUD benefits earnings due to lower import costs, whilst the substitute nature of its products can appeal to cost-conscious consumers.

Consumer environment

The environment in which TRS and all retailers have been operating has been challenging to say the least, but there are signs that some of these challengers area abating.

The latest reading of the Westpac Consumer Sentiment survey showed the index rising 0.6%, to 100.6 – its third consecutive month above the 100 level.

A reading above 100 indicates that more consumers are optimistic about the economy than pessimistic. Unfortunately the increase in consumer confidence has not translated into an increase in retail sales, which declined 0.2% in the month of December.

Oddly enough the release of the poor retail sales saw the sector move higher, as the market took the view the numbers add to the likelihood of further cash rate cuts.

FY12 results

TRS’s FY12 results were a big improvement on what was a disappointing FY11. The company grew its net profit by 35.6% on-year, to $21.9 million.

The addition of 18 new stores over the year helped sales climb 9.9%, to $555.3 million. An increase in stores was not the only reason for the jump in sales; comparable store sales grew 0.5% over the year, with a 3.2% jump in the second half.

We believe that the 2H12 momentum will continue into TRS’s 1H13 results, which are scheduled to be released on 20 February 2013.

Outlook

TRS’s FY12 results were impressive on several fronts. Besides from the strong store sales growth the group was able to reduce its debt by $16.9 million in FY12, while increasing free cash flow from $1 million in FY11 to $25.2 million in FY12.

Another notable item in TRS’s results was that gross margins rose from 38.9% in FY11, to 44.1% in FY12, likely a combination of a strong Aussie dollar and a reduction in shipping costs.

While retail sales numbers are an important indicator for the retail space, the substitute nature of TRS’s products can appeal to cost-conscious consumers, thus giving the company the ability to grow its sales in a weak environment.

Overall we believe that the aforementioned healthy balance sheet, strong comparable sales growth and expansion of gross margin will continue to drive TRSs earnings and in turn push its share price higher in the near-term.

This article was distributed to our members on February 7th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only TRS but all our current trading ideas. Simply click here and starting trading today.

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Wotif.com Holdings (WTF) is an online travel services business, which represents 23,500 in more than 67 counties. The group’s main website is wotif.com, but it also operates under lastminute.com.au, travel.com.au, Asia Web Direct, LateStays.com, GoDo.com.au and Arnold Travel Technology.

WTF, through the aforementioned websites, offers a variety of services that include flights, insurance, car rental, and travel accommodation and packages across hotels, motels, serviced apartments, resorts, guesthouses and bed & breakfasts. The service allows customers to book rooms at a heavy discount and at the same time help hotels better manage their vacancies.

FY12 impress, while 1H13 disappoints

At first glance WTF’s FY12 results looked good, however when placed in the context of the weak domestic travel market, the results were fantastic. Revenue over the year was up 5%, to $145.3 million. Net profit was $58 million, up 13.8% on the FY11 result.

The results were driven by an increase in accommodation rates and sales, and also some significant growth in WTF’s flight booking service. WTF’s operating profit margin also increased from 56% to 59%, with the group demonstrating good cost control whilst expanding revenue.

On a more disappointing side, WTF said the first quarter of fiscal year 2013 continues to reflect economic weakness. The 1Q13 performance was in line with the 1Q12 and likely to continue for the remainder of 2012.

The group is essentially saying that it expects little revenue or margin growth for the 1H13 as the operations continue to endure a period of prolonged weakness.

The good news

The AGM was not all bad news with WTF announcing its plans to lift its booking commission rate by 1% from 1 January 2013. This will be followed by a further lift of the same amount on 1 January 2014.

The group had $1.16 billion worth of transactions in FY12, and a 1% increase in commissions on this figure would increase of $11.6 million in revenue.

If the group’s strong operating profit of 59% stays consistent, the increased commissions would equate to a pre-tax profit increase of $6.8 million.

Even with flat transaction growth over the next two years, the two sets of increased commissions suggest the company still has the ability to grow earnings.

Outlook

WTF’s FY12 results showed a company that is able to grow earnings even in a tough environment. We think that the increase in commissions starting 1 January 2013 will negate the effect of continued weakness within the domestic accommodation market.

We would also expect some of the increased revenue to be redirected towards expanding into the less mature flight and holiday letting businesses, which has already started to show promising signs. Given the aforementioned factors we feel WTF has plenty of scope to continue growing its earnings, providing further support for the share price.

This article was distributed to our members on December 18th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Wotif but all our current trading ideas. Simply click here and starting trading today.

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The Reject Shop (TRS) is a discount variety retail company, targeting Australian consumers through low price points, bargain-purchasing and convenient shopping locations. The group has 239 stores in Australia, which includes the 18 new stores it added in FY12.

TRS offers a wide variety of general consumer merchandise, with a focus on everyday needs, such as toiletries, cosmetics, homewares, personal care products, hardware, basic furniture, household cleaning products, kitchenware, confectionery and snack food.

The company has two key advantages that many of its mid-to-upper market rivals don’t – a strong AUD benefits earnings due to lower import costs, whilst the substitute nature of its products can appeal to cost-conscious consumers.

FY12 results

After a somewhat disappointing FY11, TRS got itself back on track in FY12. The company grew its net profit by 35.6% on-year, to $21.9 million. The addition of 18 new stores helped sales climb 9.9% over the year, to $555.3 million.

An increase in the amount of stores was not the only reason for the jump in sales; comparable store sales grew 0.5% over the year, with a 3.2% jump in the second half.

The group’s balance sheet is also in a healthy position. TRS was able to reduce its debt by $16.9 million in FY12, while increasing free cash flow from $1 million in FY11 to $25.2 million in FY12.

A strong Aussie dollar combined with a reduction in shipping costs saw the company’s gross margin rise from 38.9% in FY11, to 44.1% in FY12.

Consumer environment

Australian retailers have been operating in an extremely challenging consumer environment, but we could be seeing a return to better conditions.

Last week saw the release of the Westpac Consumer Sentiment survey, which showed the consumer sentiment index rising 5.2% to 104.3. It is the highest level the index has been at in 19-months, and the first time over 100 in nine months. A reading above 100 indicates that more consumers are optimistic about the economy than pessimistic.

The main reason for the uplift in the consumer confidence is likely the recent series of rate cuts, and yesterday’s release of the RBA’s minutes from the October meeting did flag the possibility of further interest rates cuts in the coming period, which in turn could see a further increase in confidence.

Outlook

TRS’s FY12 results were impressive on several fronts. The group was able to grow sales on a comparable basis, improve its margins, increase its free cash flow, record a huge jump in profit, all while paying back $16.9 million in debt.

The recent pickup in consumer confidence could not have come at a more perfect time, with the busy Christmas season just around the corner. Whilst the company declined to provide any specific guidance for FY13, we feel that with the addition of 17 new stores before Christmas, strong sales growth is all but assured.

Overall we see continued growth for TRS, which should hopefully translate to further share price appreciation.

This article was distributed to our members on November 21st, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only The Reject Shop but all our current trading ideas. Simply click here and starting trading today.

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Crown (CWN) manages a variety of gaming and entertainment facilities, including, bars, restaurants, nightclubs, cinemas and retail outlets. It also develops hotels and conference center facilities.

The company wholly owns and operates two integrated resorts; the Crown Entertainment Complex in Melbourne and Burswood Entertainment Complex in Perth. Mr James Packer currently owns a 48.1% stake in the group.

CWN also has an interest in several different projects including: 33.6% interest in Melco Crown entertainment, which is based in Macau, 50% interest in online gambling site Betfair, 24.5% interest in Cannery Casino Resorts in the US, 50% interest in Aspers Holdings (UK) which operates three regional casinos in Newcastle Swansea and Northampton, 10% interest in Echo Entertainment.

FY12 Results

CWN’s FY12 results continued to impress against the backdrop of a challenging consumer environment. The company reported normalised FY12 NPAT of $415.0 million, which was an increase of 22% on the prior corresponding year.

CWN’s Australian casinos reported revenue growth of 8.9% to $2,630.1 million, with normalised EBITDA up 5.1% to $736.9 million. A breakdown of the two main facilities showed that Crown Melbourne’s normalised EBITDA grew 1% to $510.6 million, whilst Burswood EBITDA gained 15.9% to $226.3 million.

The company declared a final dividend of 19 cents, which equates to a healthy yield of over 3.5%.

Six-star hotel

Today CWN announced that it had had received stage one approval from the NSW government to build a new $1 billion six-star hotel resort with VIP-only gaming facilities at Sydney’s Barangaroo.

This is stage one of a three stage process and if approved would be Australia’s first six-star Casino. This is an interesting move for CWN as it had been previously thought that it would try to take over Sydney’s Echo Entertainment (EGP).

The whole development faces an uphill battle, with EGP currently holding the only casino licence in Sydney, and an exclusivity agreement in place until November 14, 2019.

CWN will have a casino business in Sydney, Mr Packer has made this abundantly clear in the past. The questions that remain are when it will happen and whether it will be a takeover of EGP or a new complex all together.

The new complex won’t happen until the exclusivity agreement expires as the project would be unviable without at least a VIP gaming facility.

Outlook

CWN”s results speak for themselves, they were able to grow earnings in a tough consumer environment. The purchase of EGP could still be CWN’s ultimate plan, as it has applied to increase its stake in the company to 25%.

Whilst a new gaming facility may be a longer-term plan for CWN, we see it more as a back-up if it can’t acquire EGP. There is also a possibility that the whole plan is a move to scare EGP into selling as the increased completion in the VIP segment may be too damaging to EGP’s earnings.

Overall we see any move that CWN makes into the Sydney’s casino market as good one.

This article was distributed to our members on October 25th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Crown Limited but all our current trading ideas. Simply click here and starting trading today.

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JB Hi-Fi (JBH) is a chain of electrical stores, selling leading brands of hi-fi, speakers, televisions, DVDs, cameras, car sound, home theatre, computers, white goods, portable audio and a variety of music, games and movies.

The company has been able to grow its sales over the last 5 years in what can only be described as the most difficult trading conditions for retailers in 20+ years.

JBH’s strategies for growth are simple; increase the number of stores, increase sales, and through that, increase profit. JBH’s expansion is not only in the Australian market, but also in New Zealand. Since entering the New Zealand market in early 2007 it has opened 13 stores.

FY12 Results

JBH’s FY12 results were ok without being great, but in context of the consumer environment over the twelve months, the results was great in our view.

Sales for the twelve months to June 30 were $3.13 billion, up 5.7% on the prior year. This was a solid result given that major retailers including Myer, David Jones and Harvey Norman all recorded negative growth.

Net profit was $104.6 million, down 4.6% on the FY11 result. The company blamed heavy price-cutting by rivals which saw its EBIT margin decrease by 33 basis points to 5.2%.

What is one of JBH’s major strengths is its cost of doing its business (CODB). Its COBD fell 70 basis points to 14.9%, which is much lower than competitors Dick Smith, David Jones and Myer, which were at 23.5%, 29.0%, and 32.1% respectively.

Consumer environment

As mentioned JBH has been operating in a weak consumer environment, however it could be on the verge of a turnaround. The consumer sentiment index rose 1.0% to 99.2 in October.

A reading below 100 indicates that more consumers are pessimistic about the economy than optimistic. Despite more pessimist than optimists the index is at its highest point since February 2012.

Helping sentiment was the RBA earlier this month cutting the official cash rate by 25 basis points and hinting it was moving towards a more easing bias. We believe this move will help grow consumer confidence which in turn should help grow retail sales.

The turnaround in consumer sentiment may be closer than many think with Woolworths CEO Grant O’Brien saying yesterday “I think there’s a little bit of light at the end of the tunnel in terms of the customer feeling better.”

Looking ahead

JBH’s full year results showed sales growth, which in an environment where other retails are contracting, is a positive.

The company’s low CODB when compared with its competitors also allows it to continue its aggressive pricing strategy; this ensures it does not lose its current market share and helps it actually gain market share.

As for the consumer environment we are finally seeing signs of a turnaround and we would not be surprised if the next consumer confidence reading indicates more optimists than pessimist.

We have been hesitant to recommend longs on any retailers as of late given the tough environment, but if there is a turnaround in this area we believe JBH will be one the first to benefit.

This article was distributed to our members on October 19th, if you would like further information you can sign up for FREE 7 day recommendations and access all our research files on not only JB HI-FI but all our current trading ideas. Simply click here and starting trading today.

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