DON’T be surprised if Myer chief Bernie Brookes joins Woolworths supremo Mike Luscombe in wistful references to life beyond the rigours of the checkout.
Myer Holdings (MYR) $3.32
JB Hi-Fi (JBH) $19.43
David Jones (DJS) $4.53
Myer stock yesterday tumbled 43c, the biggest one-day decline since its November 2009 listing, after the retailer baldly reported a “significant, unexpected and rapid” January sales decline.
While management to date has made an art form of squeezing higher earnings from consecutive quarters of lower sales, current year earnings will be up to 5 per cent lower than the previous $169m.
Also yesterday, official numbers showed December quarter retail sales rose 0.2 per cent, well shy of the expected 0.5 per cent. Other discretionary retailers must be feeling the squeeze — try Premier Investments — but not the venerable JB Hi-Fi.
The much-loved grunge mart posted a first-half 15 per cent profit surge to $87.9m.
JB’s like-for-like sales were down 1.5 per cent on a like-for-like basis, but the mitigating factor is that sales soared 9.9 per cent in the previous December half.
This time around, JB didn’t benefit from the “wow” factor of Nintendo Wii and DS, the Christmas 2009 gadgets of choice for the young and young and heart.
Despite the vicissitudes, JB chief Terry Smart cheerily points to full-year net earnings of $134-139m, only a tad off consensus expectations of $140m.
Criterion upgraded JB Hi-Fi from a hold to a buy at $17.48 on December 16 and we’ll revert to a hold.
We had Myer as a hold at $3.79 on November 19 and declare the stock an avoid: arguably it’s a turnaround play, but we sense more selling.
David Jones shares fell in sympathy with Myer’s, down 4 per cent.
We last rated the stock a buy at $4.67 on November 19 and maintain the call.
After all, DJ’s clientele are impervious to consumer sentiment — that’s for the common folk with mortgages — and wouldn’t know whether there was a blizzard or flood unless their pool boy told them.
Resource Equipment (RQL) 61.5c
WHEN it comes to natural disasters, some folk send generous donations or strip down to join the sandbagging with complete strangers. Then there’s those whose natural reaction is: “how can I make a buck out of this?”
Resource Equipment, which specialises in mine dewatering and water management, has captured the attention of offshore brokers and fund managers, who normally would not give a $140m stock a second of their precious time. According to CEO Jamie Cullen, the Perth-based outfit has also been inundated with calls from inundated Queensland miners. “Every hole in the ground became full of water and there’s obviously an urgent need to get rid of the water,” he says.
However, the water needs to subside first and, in many cases, access won’t be possible for six to eight weeks. Even if the water can be pumped, a permit is needed to dump the stuff.
Cullen says there’s not likely to be a revenue impact until the fourth (June) quarter but “we’re certainly talking to a lot more miners than we previously were”.
Last year, the company derived about 1.5 per cent of revenue from the east coast; this year it’s likely to be more like 20 per cent.
On broker estimates, Resource Equipment is expected to generate $9.5m of earnings this year on revenue of $40m. The company has $27m, of tax losses, a legacy of listing via the shell of failed debt collector Repcol.
The shares have had a decent run already, but sneak in as a long-term buy for those unfazed by the lack of a dividend.
AGL Energy (AGK) $15.01
STILL on the weather, the Goldilocks syndrome reigns supreme at the energy retailer: conditions have been either too hot, too cold or too wet for optimum earnings generation.
Dropping a circa 8 per cent earnings downgrade yesterday, AGL complained of concurrent high temperatures in Victoria, NSW and South Australia, which coincided with soaring wholesale prices.
While AGL hedges against (wildly fluctuating) wholesale prices with forward agreements and the like, it doesn’t cover such extreme conditions.
We had AGL as a long-term buy at $14.91 in mid-December and maintain the call.
But let’s hear no more about AGL as a classic defensive play.
The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author does not hold shares in the stocks mentioned.
[Source: theaustralian.com.au]
