‘Underperform’
Forsyth Barr equity analyst Paul Koraua said the result was a “good improvement”, but the company had lost more margin than they had expected.
However, because the share price has risen nearly 15% since the company was added to the NZX 50 index in June, the investment case has changed, he said.
It is a stock that ordinarily trades on a price-to-earnings ratio of about 13, and it is currently sitting at about 20.
“That’s more than three standard deviations away from its historic level,” he said. “It just looks super expensive versus where it has historically traded.”
A month ago, Forsyth Barr set its target price at $5.95 and downgraded it to ‘underpeform’ from ‘neutral’.
Guidance and sales mix
The operator of Briscoes homeware and Rebel Sport stores said it expected group net profit after tax to be no less than $29m for this first half.
In its first quarter update in May, the group said it expected first-half profits to come in “around $30m”.
The company maintained guidance that full-year profitability will be weighted to the second half, with Duke citing hopes for a gradual economic recovery.
“[We] continue to expect second half profitability to exceed the first half in a return to a more normalised shape of annual profitability,” he said.
Duke added that the group was “disappointed” with a sales decline of 1.34% in the Rebel Sport segment.
“However, these sales tend to be more sensitive to the strength of discretionary spend, which continues to reflect the ongoing tough economic environment and subdued consumer sentiment.”
Online sales comprised 19.97% of second-quarter revenue, with the half-year digital share rising to 19.36% from 18.77% a year earlier.
Full half-year results are due on Sept 10, including an interim dividend announcement.
