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.

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Paladin Energy (PDN) is a uranium miner, with projects located in Africa and Australia.

PDN’s long-term goal is to establish itself as a uranium producer through identifying, acquiring and evaluating advanced uranium projects.

The group’s current focus is on its African projects: Langer Heinrich (Namibia) and Kayelekera (Malawi).

PDN shares have slumped in the few months since the Japanese nuclear crisis and the company last week released a reassuring statement aimed at stopping the share price rot.

PDN says its financing facilities are in good standing and clarified that it currently has no plans to raise fresh capita – debt or equity – outside of the financing of its stage 3 expansion of its Langer Heinrich project .

The uranium miner says the feasibility study on its stage 4 expansion is proceeding as schedule and the company is expecting a positive outcome.

PDN also said that key shareholder Newmont Mining (one of the world’s largest gold miners) has indicated it will hang onto its 6.71% stake in PDN in the near-term and that the company has mechanisms in place if Newmont decided to sell out.

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Daily Global Trading News April 13 2011

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Global Trading News April 12 2011

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Myer Holdings (MYR) is among Australia’s largest department stores, retailing apparel, fashion, fragrances and cosmetics, homewares, electrical goods and general merchandise.

The company floated on the ASX in November 2009 and became one of the shares to sell in the months that followed amid a generally bearish outlook for retailers.

The group was hit hard on Monday after warning that its FY11 net profit was expected to be down 5% from FY10’s result.

Last November, MYR said that FY11 earnings were expected to grow 5% – 10% on-year.

MYR attributed the downgrade to a fragile consumer environment as a result of increased costs of living, the anticipated flood levy and food inflation.

MYR also offered a sombre assessment of first half sales, which it said were impacted by significant price deflation in a number of key product lines.

MYR tumbled 11.5% following its update, making it one of the worst performers in the Australian share market on the day.

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Macarthur Coal Limited (MCC) is the largest low volatile pulverized coal producer in the Australian Stock Market which exports its products to leading steel producers.

In stock news, MCC has settled prices for its pulverized coal with customers.

The settlement has resulted in a shorter-term pricing structure, however MCC did not divulge the price that had been struck.

The short-term pricing structure means the contracts are more likely to be in line with market prices.

This follows BHP’s agreement with Japanese-steel makers last week, where the iron-ore miner negotiated contracts for its coking coal on a quarterly pricing structure.

MCC has had a bull market run over the last year and has reached a yearly high of around the $12.50 mark.

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