Collected Wisdom

This week we look at Aconex, Premier Investments, Myer, TPG and Kathmandu.

Summary: Analysts see Aconex’s (ACX) recent European acquisition as a positive for its long term position in the project management software space, while the Smiggle brand is the key driver for growth at Premier Investments (PMV). Myer’s (MYR) first half result was a positive surprise to analysts, though they warn the retailer is not out of the woods yet, and TPG’s half year result beat expectations.

Key take out: A turnaround at adventure equipment retailer Kathmandu (KMD) has pleased analysts, with half year results revealing a jump from a $NZ1.8 million loss in the prior corresponding period to a $NZ9.4 million profit. Consensus is a hold on the stock.

Key beneficiaries: General investors. Category: Shares.

This is an edited summary of the Australian investment press: It includes investment newsletters, major daily newspapers and broker reports. The recommendations offered represent the views published in the other publications and may not represent those of Eureka Report. This article is general advice only which has been prepared without taking into account your objectives, financial situation or needs. Before acting on it you should consider its appropriateness, having regard to your objectives, financial situation and needs.

Aconex Limited (ACX)

Last week was a big week for the cloud and mobile-based building project management app Aconex. Not only did it make it into the S&P/ASX300 but it also announced the acquisition of its main European competitor, Conject Holding.

The capital for the $96 million deal came from a $120m placement completed last week. The remaining amount raised will provide Aconex with additional working capital. Management expect the acquisition to be “significantly accretive” to FY17 EPS, even suggesting it could be in the high teens.

Analysts have seen the move as a positive one cementing Aconex’s position in Europe and looking to leverage its scale. One analyst has commented on the need for Aconex to run two platforms side by side in Europe as it is highly unlikely users will switch platform mid project. They anticipate this to be a drag on FY16 earnings before being accretive as management have suggested in FY17.

The current average 12 month price target is $6 and at the time of writing the share price was $5.56.

Investors are generally advised to hold Aconex Limited at current levels.

Premier Investments Limited (PMV)

Collected Wisdom last featured Premier Investments after its FY15 result back in September last year (to read that report, click here). At the time, the major talking point among analysts was the success of sleepwear store Peter Alexander. This time around, Betty and Butch – the Peter Alexander dachshunds – move over as Smiggle becomes the main talking point.

Premier Investments’ 1H16 result surprised on the upside. Prior to the result, the share price was already trending upwards and continued to do so strongly as the retail group posted an increase in NPAT of 24.9 per cent on the prior corresponding period.

Analysts anticipate Smiggle to be the key driver for growth in the future as the UK expansion appears to be going very smoothly. In 1H16 a total of 18 stores were opened in the UK. The UK roll out is picking up even further pace, with a further 28 stores expected to open in the second half.

Also impressing analysts was the company appearing to get the right balance between growth and margin. Gross margins were up 64.8 per cent on the prior corresponding period.

Given the rise in share price, analysts have PMV as a hold with the average 12 month price target at $14.90. At the time of writing the share price sat at $15.79.

Investors are generally advised to hold Premier Investments Limited at current levels.

Myer Holdings Limited (MYR)

Last week (March 17) Myer released its 1H16 result to the market surprising most observers with its stronger than expected numbers. All analysts commented on the retailer’s progress towards the “New Myer”.

NPAT was down four per cent on the prior corresponding period at $59.7m, but above analyst expectations. Myer management took the chance to be more specific with their guidance for the full year bringing the range in from $64m-$72m to $66-$72m.

FY16 is shaping up to be the transformative year that MYR shareholders expected. The focus on wanted brands instead of private label is picking up speed with 500 brand installations across the stores. Additionally, as part of the transformation for the optimisation of the network, two previously planned store openings have been scrapped and the Brookside store will close in 2017.

While all analysts commented positively on the so far successful transformation they weren’t without caution. Apart from continuing to successfully execute its plans the major challenge is competition from global retailers.

The current average 12 month price target for Myer is $1.25 with the share price sitting at $1.245 at the time of writing.

Investors are generally advised to hold Myer Holdings Limited at current levels.

TPG Limited (TPM)

David Teoh and company have done it again at TPG with its latest round of results. Announced on Tuesday (March 22), TPG’s 1H16 result beat consensus estimates again with EBITDA and NPAT coming in at $368m and $163m respectively.

TPG’s broadband subscriber base grew by 32,000 subscribers this year, including 34,000 more NBN subscribers. iiNet subscribers were flat in line with 1H15. The board have decided to increase the dividend from the last interim dividend of 5.5 cents per share to seven cents fully franked.

The iiNet acquisition contribution to earnings impressed analysts, beating their expectations and analysts are assuming even further benefits from synergies with more cost outs. The average 12 month price target is $11.22. At the time of writing the share price was $11.09.

Investors are generally advised to hold TPG Limited at current levels.

Kathmandu Holdings Limited (KMD)

Outdoor adventure clothing retailer Kathmandu is once again profitable, turning a loss of $NZ1.8m in the prior corresponding period into a $NZ9.4m profit as announced in the 1H16 results on Tuesday (March 22).

Sales increased 9.3 per cent, gross profit increased 15.8 per cent and margins increased from 59.3 per cent to 62.8 per cent, all pointing towards a positive turnaround for the struggling retailer. The upcoming Easter and winter trading period will be crucial to KMD’s full year result. The Easter and winter period are when KMD holds its largest sales and historically make up approximately 60 per cent of total sales. That being said, management commented they remain committed to FY16 NPAT guidance of $30.2m.

Analysts all round were impressed with the progress management has been able to make turning the retailer around with a disciplined approach. All analysts commented that the company is not out of the woods yet. They all want to see KMD perform like this through a full cycle. They will be watching the Easter and winter sales period very closely and this is why KMD is still rated as a hold despite trading $0.20 below the average price target.

The average 12 month price target for KMD is $1.71. At the time of writing, the share price was $1.50.

Investors are generally advised to hold Kathmandu Holdings Limited at current levels.