Cash Converters (CCV) is a company-owned and franchised retail network that specialises in the sale of second hand goods.

The stores located around the world offers a range of service which varies with pawn-broking loans available in selected markets as well as a personal finance business that operates in various forms in the micro-lending category around the world.

The group has managed to survive through the global economic crisis via its counter-cyclical characteristics – people look to second-hand goods and cash advances in tough times.

The company after a recent capital raising is in a very strong financial position, enabling the acceleration of store acquisitions and an increase to its loan books in Australia and the UK. CCV currently has 106 corporate stores, with 61 in the UK and 45 in Australia.

First quarter trading update

CCV’s 1Q13 results were impressive. The group reported a 1Q13 EBIT of $14.2 million, a massive 43% increase on the prior corresponding period.

The result was driven by a 155.4% increase in EBIT from the UK operations. With the UK loan book growing to 15.3 million pounds, a 146.1% increase on the prior correspond quarter and a 20.8% jump on the June 2012 quarter.

The Australian loan book also preformed strongly, growing to $67.1 million, a 32.7% increase on the same quarter in FY12. The group also noted that it acquired two new stores and opened up another two new in the quarter.

Capital raising

The group last month raised $32.7 million by issuing 38.5 million new shares at $0.85. The funds from the placement will be used to acquire stores within the franchised network, to open new corporate stores and to finance the growth of the Australian and UK personal loan books.

The offer was substantially oversubscribed, by both existing and new institutional investors. The stock price jumped over 12% the day it came out of a trading halt, this in essence signalling the markets approval of  the company’s capital raising.

CCV currently has 708 stores around the world with the largest concentration being in the UK were there are 222 stores of which 61 are company owned. The company has a target of 400 UK stores of which at least 25% of those will be company owned.

The capital raising makes the aforementioned expansion plans possible and with gearing only at 17.6% it still has plenty of room to expand further via debt.

Outlook

CCV delivered spectacular quarterly results and see no reason why this won’t be the case in the next quarter.  We think that the group’s capital raising will be earnings accretive immediately as a decent portion of the funds will be used to buy mature franchise stores.

The funds will also be used to expand its loans books, which it should be able to increase without too much delay.  Overall CCV’s expansion plans should continue to help it continue earnings and we believe this will translate into further share price appreciation.

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Wesfarmers Ltd. owns retail chains, operates mines, writes insurance, manufactures and distributes industrial products, manufactures fertilizers and chemicals, and distributes liquefied petroleum gas and medical and industrial gases.

Blue chip stock Wesfarmers said today at a strategy briefing that third-quarter sales at its Bunnings home improvement stores were up 4.7% on year.

The company also said that comparable store growth for Bunnings climbed 2.6% over the same period.

Wesfarmers’ Officeworks chain sales in the third quarter were up 2.5%.

Management said market conditions remained challenging, with competitive pressure on sales and margins and concerns about consumer sentiment continuing.

Metcash Limited (MTS) is a marketing and distribution company operating in the food and other consumer goods sectors.

MTS is divided into four business units: IGA Distribution, Campbell’s Wholesale, Australian Liquor Marketers and Mitre 10. All of the business units are full owned by MTS with the exception of Mitre 10, which is 50.1% owned.

Last year, MTS completed a takeover of New South Wales supermarket chain, Franklins. The deal was finalised after the Full Court dismissed the ACCC’s appeal to block the merger on the 30th of November.

Margin squeeze

The domestic supermarket industry is dominated by Woolworths and Wesfarmers-owned Coles, with MTS coming in at a distant third.

Significant price deflation has crimped profit margins across the industry, but MTS has been hit harder than its bigger rivals.

Based on semi-annual figures, MTS’ EBITDA margin has contracted over 20% between November 2009 and November 2011.

In that same time, Wesfarmers and Woolworths have seen their EBITDA margins rise 5.4% and 1.7%, respectively.

There may be many other reasons behind the discrepancy, but it is apparent that MTS is struggling to keep up with the aggressive discounting being implemented by Wesfarmers and Woolworths.

Business restructuring

In early April, MTS shocked investors by announcing a $34 – $43 million restructuring charge related to the consolidation of its businesses and the closure of 15 regional Campbells Cash & Carry (Campbells) branches.

Additionally, MTS will book a $75 – $90 million non-cash restructuring charge related to the underperformance of two JVs in Queensland.

The write-downs followed a disappointing 1H12 for MTS, in which its underlying profit rose just 1.4% on-year to $116.6 million.

Campbells was the most disappointing business unit, with EBITA decreasing 35% to $16 million and EBITA margin dropping 73 basis points (bps) to 1.2%.

IGA Distribution – the largest of all the business units – saw its EBITA rise only 0.8% and EBITA margin slipping 5bps to 4.73%.

Outlook

Conditions for supermarket retailers like MTS have been terrible over the past two years and things are unlikely to turn around in a hurry.

MTS is in the unfortunate position of having to contend with two industry behemoths in Coles and Woolworths.

Metcash: Stocks To Watch

These companies have been forced into aggressive price discounting in order to attract customer sales, and this has come at a huge cost to MTS’ margins.

In response, MTS has looked to streamline its business through consolidation and the closure of its Campbells branches.

However it will be a stock to watch as there are questions as to whether more write-downs may be needed down the track if trading conditions deteriorate further and/or price deflation continues to cut into MTS’ margins.

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Wesfarmers (ASX:WES) is Australia’s leading conglomerate, headquartered in Perth, Western Australia.  It is also widely considered among the market’s blue chip stocks.

The company owns several iconic Australian businesses, including supermarket chain Coles, hardware retailer Bunning’s Warehouse, discount department stores Target and K-Mart, and office supplies provider Officeworks. WES also involves in industrials supplies distribution, coal mining, fertilisers, chemicals and general insurance.

Today, WES announced that it has sold its Premier coal mine to Chinese-based Yancoal, for $296.8 million.

The deal needs approval from Australian and Chinese regulators, and WES said that the sale would generate an additional $90 million in pre-tax profit.

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Wesfarmers (ASX:WES) is Australia’s leading conglomerate, and one of the most widely know blue chip stocks in the Australian share market.

Since listing on the ASX in 1984, the company has recorded strong growth in assets and profits.

The company owns several iconic Australian businesses, including supermarket chain Coles, hardware retailer Bunning’s Warehouse, discount department stores Target and K-Mart, and office supplies provider Officeworks. WES also involves in industrials supplies distribution, coal mining, fertilisers, chemicals and general insurance.

Today, WES reported its full year results.

FY11 net profit climbs 22.8% to $1.92 billion, exceeding analyst estimates of a $1.88 billion profit.  A final dividend of $1.50 was declared, also beating estimates.

Coles earnings growth outpaced sales growth, reflecting operational efficiencies at the division.  Kmart and Bunnings also recorded earnings growth.

However, Target EBIT slumped 26.5% due primarily to price deflation and clearance activity.

Revenue at the Coal division grew 25.6% on-year, with record export prices and strong demand offsetting the impact to production from the early-year flooding.

WES was optimistic about the outlook given solid operating fundamentals, but said its outlook was subject to any adverse shocks from the fragile global economy.

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Wesfarmers (WES) is Australia’s leading conglomerate, headquartered in Perth, Western Australia.

Since listing on the ASX in 1984, the company has recorded strong growth in assets and profits.

Wesfarmers owns several iconic Australian businesses, including supermarket chain Coles, hardware retailer Bunning’s Warehouse, discount department stores Target and K-Mart, and office supplies provider Officeworks. WES also involves in industrials supplies distribution, coal mining, fertilisers, chemicals and general insurance.

WES is also one of the market’s blue chip stocks and has been considered among the shares to buy for a number of years.

WES reported its third quarter retails sales results today, with the results coming in above market expectations.

Standout supermarkets

The Coles business was the standout performer, with its Food and Liquor division sales growing by 7.1% and Convenience division sales increasing by 12.1%. These numbers beats its long term rival Woolworths (WOW) which only achieved 4.6% growth in its Australian Food and Liquor division.

We believe Coles has been stealing market share from Woolworths over the past few months, on the back of its aggressive expansion and discounting strategy.

Bunnings also delivered impressive results. The home improvement businesses grew its sales by 8.1%, also beating consensus estimates on the back of enhancements made to its customer offering and solid sales contribution from newly-opened stores.

Officeworks also delivered positive growth despite challenging operating conditions and subdued spending from small businesses. The office supplies division achieved 3.5% growth.

Target sales declined by 0.1%, due to the continued price deflation in general products, and lower volume of sales in electrical products. Target did manage to somewhat offset this by solid growth in apparel and homeware products.

Kmart sales slightly disappointed, with revenue falling by 2.5% due to price cuts. The lower prices has helped Kmart to increase its overall sales volume and may help them to grow its market share, which we believe will benefit the business over the longer term.

Shares not on sale

WES is trading at 16.5 times FY11 earnings, which looks fairly valued at current price levels.

If Coles continues to turn around and coal price remain solid, we do some further upside to WES’s valuation.

WES could also unlock significant value if it can spin off some of its non-core business, with some analysts finally losing patience with the company’s trademark diverse earnings base. Some investors have argued that WES has grown too big and has lost some operating efficiency due to the distinctive nature of businesses they currently own.

If WES spins off its fertiliser or general insurance businesses or its coal assets, it may help to unlock hidden value for WES shareholders. If these businesses were trading as standalone entities, they would undoubtedly attract greater takeover interest from domestic and international corporations.

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Wesfarmers (WES) is a major diversified Australian company that covers a wide scale of industries.

These include retail, home improvement and building supplies, coal mining, gas processing and distribution, industrial and safety product distribution, manufacturing of chemicals and fertilisers and insurance.

The company is also widely considered among the market’s blue chip stocks.

On 21 October, WES reported its first quarter sales and coal output numbers.

Sales at Coles grew 5.9% on-year, outpacing Woolworths’ 3.2% gain yesterday. WES attributed the result to new store openings, and better quality fresh food.

Kmart and home improvement sales were up 3.7% and 3.9%, respectively, driven by in-store improvements and lower prices.

However, Target sales declined 1.4% amid tough trading conditions due to an extended period of cold weather, and price deflation.

At WES’ Curragh Mine, coal output declined 9.4% from the previous quarter, with unseasonable wet weather impacting the production of its metallurgical coal production.

Bengalla coal production fell 24.7%, also due to wet weather, whilst Premium output rose 12.9% as it became the sole supplier to Verge Energy from 1 July, 2010.

WES shares jumped 2.5% on the day, making it one of the better performers in the Australian share market.

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Wesfarmers (WES) is an Australian conglomerate and is considered among the best of the blue chip stocks.

It has a diverse range of business, covering supermarkets, department stores, coal mining, insurance, chemicals, and industrial products.

In its recent 4Q10 sales update, WES reported a 5.5% on-year jump in sales to $7.45 billion.

On a quarterly basis, sales rose 4.2%, which was better than Woolworth’s (WOW) 3.5% increase in the same period.

Kmart sales gained 1.1%, which was a very good result considering WOW’s Big W reported a 9.3% slump in sales.

The only area of concern was Target, which saw a 4.4% fall in sales.  Like WOW, WES cited the cycling of government stimulus and price deflation as the key factors which weighed on sales.

The stock market saw WES as the one of the key shares to buy on the day of the sales update, with its stock price rising by 3.2%.

22 April 2010

Wesfarmers (WES) is a conglomerate that has diverse operations in a number of sectors including retail, energy, insurance, industrials, chemicals and fertilizers.

WES reported 3Q10 retail sales today, with the result coming in below expectations.

Over the year, sales at Coles rose 4.9%, Kmart sales climbed 4%, whilst Target sales were flat.  Home Improvement and Office Supplies recorded a strong result, with sales up 7.9% on-year.

The weak sales growth at Coles was put down to food price deflation, and Target’s flat sales number was due to the fading out of government stimulus.

WES continued to maintain a cautious outlook for 4Q sales, sighting rising interest rates and cycling of fiscal stimulus as the main headwinds.

WES has made good progress in terms of its Australian share price so far, trading from as low as $15.00 in February 2009 to trading above the $30 mark in recent sessions.

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Despite a slow start, the Aussie stock market finished last week comfortably in positive territory.

The market put on 54 points (+1.1%) for the week, to close at 4872.

The info-tech sector led the week’s gains, with telcos and energy stocks not far behind.

Computershare (CPU) and Iress Technology (IRE) sparked the info-tech sector, with CPU rising 3.9%, and IRE soaring 4.3%.

Telstra’s (TLS) share price surged 3.6% for the week, after the Federal government delayed the debate to split it up until May.

Arrow Energy (AOE) was placed in a trading halt on Friday on speculation that Royal Dutch Shell and PetroChina would sweeten their takeover offer.  AOE’s share price rose 1.7% for the week.

Other energy stocks also recorded decent gains for the week.  Oil Search (OSH) rocketed 4.7%, and Woodside Petroleum (WPL) climbed 2.9%.

Stock market giant Rio Tinto (RIO) and Chinalco signed a US$1.35 billion agreement on Friday to jointly develop the Simandou mine in Guinea.  RIO inched 0.3% higher for the week, and BHP Billition (BHP) advanced 0.8%.

David Jones (DJS) announced a 10.2% jump in 1H10 profit, however a cautious sales outlook saw its share price sink 4.7%.  Rival Myer Holdings (MYR) slumped 3.7%.

Among consumer staples stocks, Metcash (MTS) announced the closure of its Campbells Cash & Carry business.  Its share price dipped 1.2%, Wesfarmers (WES) declined 0.6%, whilst Woolworths (WOW) advanced 1%.

The financial sector also edged higher, with Australia and New Zealand Bank (ANZ) jumping 3.5%, and Westpac Banking Corporation (WBC) gaining 2% for the week.

The major economic news for the week that impacted the stock market was the RBA’s minutes for March.  The central bank noted that the Australian economy is on track to achieve trend growth in the next two years.