Super Retail Group

About the author:

Josephine (Jo) Little
Author name:
By Josephine (Jo) Little
Job title:
Senior Analyst
Date posted:
20 February 2014, 12:57 PM
Sectors Covered:
Consumer Discretionary, Industrials & Developers

The results

Results for Super Retail Group are generally in-line given recent guidance - Sports slightly below and Leisure slightly above our forecast. EBITDA beat our forecast by 3.1%.

  • Auto - margins (+30bp) were strong, in spite of price matching with Repco during the period. Operating costs (% of sales) fell by 0.5%.
  • Leisure - GP margin down 140bp, but not quite as bad as the 200bp we were expecting. EBIT margin is also down 140bp. Operating costs (% of sales)) was in line with the pcp.
  • Sports - GP margin down 10bp and EBIT margin is flat. Note the dilutive margin impact from Amart rollout in Victoria - this should start to normalise from here.

Net debt of A$239m was lower than our forecast of A$325m, but expected to increase back up to A$330m by 30 June 2014.

The final dividend of 18.5c (fully franked) was above our forecast of 17c. A nice surprise on a flat profit result.

Our view 

We expect a positive reaction to this trading update, however the stock may still be in the sin bin for a bit longer post the 1H miss. We are expecting SUL to provide more details on what happened in the 1H which may provide some comfort. 

SUL is now trading on a market multiple (15x FY15), and a 1.5 PE point premium to retail peers. We believe the stock is attractive at current levels and we are happy to accumulate with a strong FY15 in sight.

We retain our Add recommendation with a share price target of A$13.27.

More information

Morgans clients can access our detailed report on Super Retail Group (SUL). If you are interested in becoming a client please contact your nearest Morgans office.

Disclaimer(s): Analyst owns shares.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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