Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Smiths City shares climb after Edison says stock undervalued

Smiths City shares climb 8% after Edison report says stock undervalued

By Suze Metherell

Aug. 27 (BusinessDesk) - Shares of Smiths City Group climbed 8 percent after a report by Edison Investment Research said the furnishing and appliance store's plans to expand to the North Island hold promise, and the stock is undervalued relative to its peers.

Edison puts fair value on the company at 83 cents per share, valuing Smiths City at $44 million. That's a 69 percent premium to the 49 cents the shares were trading at before the release of the report, which was compiled at the Christchurch-based company's request. The shares rose 4 cents today to 53 cents, and have climbed from a two-year low earlier this month.

Smiths City has about 4.7 percent of the national furnishings and appliance market through its 26 South Island stores and 14 North Island stores, which covers about 47 percent of the country's population, Edison said. The company doesn't have a presence in Auckland, the most populous, fastest-growing region in the country, having put expansion plans on hold after the Canterbury earthquakes in 2010 and 2011 when its Colombo street flagship store in Christchurch was significantly damaged.

In June, the company's chairman said the earthquake upheaval was effectively behind the company, and signalled further North Island expansion, moving into new premises in Palmerston North and Rotorua in November. The company also said it is considering expanding further into the Auckland market, with structural changes to the organisation meaning it was well positioned to, should an opportunity arise. Smiths City's entry into Auckland would be the best via an acquisition, Edison said.

Annual profit fell 24 percent to $4.1 million for the year ended April 30 as revenue fell 0.8 percent to $220.7 million on weaker appliance sales, the company said. Smiths City is shifting to focus on its furnishing offerings, which offer more stable margins, as the appliance sector grows increasingly competitive, Edison said.

"The company was significantly affected by the Christchurch earthquakes in 2010 and 2011, but is now ready for expansion and growth," Edison analysts Neil Shah and Victoria Buxton said in the report. "Based on modest organic growth our valuation is still some 69 percent than the current (49 cents) share price, implying the company is trading at a noticeable discount to its peers."

Shares of Smiths City cheaper than the company's peers, trading at a price-to-earnings ratio of 5.1 times, or 8.6 times on Edison's valuation, compared to the median PE of 15.7 times compared to the six constituents Edison lists as peers. Smiths City's gross dividend yield of 7.9 percent, or 4.7 percent at Edison's valuation, is around the median of 7.3 percent.

Among the listed retailers Edison includes as Smiths City's peers are The Warehouse, New Zealand's largest-listed retailer which has a market cap of over $1 billion, and a PE of 14.9 times, Michael Hill International, the Brisbane-based jeweller with a market cap of about $479 million and a PE of 12.5 times, and Briscoe Group, the discount homeware business which has a market cap of $616 million and a PE of 16.6 times.

Edison forecast net profit to be $5.1 million in the 2015 financial year on sales of $224.8 million, growing to profit of $5.2 million in 2016 on sales of $229.2 million, with modest revenue growth in the South Island and North Island expansion holding the greatest promise of growth.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: Alex Swney Pleads Guilty To $2.5M Fraud Charge

Alex Swney, former chief executive of the Auckland city centre business association Heart of the City, has pleaded guilty to dishonestly using documents to obtain $2.5 million. More>>

ALSO:

Petrol Burns Prices: Second Consecutive Quarterly Fall For CPI

The consumers price index (CPI) fell 0.3 percent in the March 2015 quarter, following a 0.2 percent fall in the December 2014 quarter, Statistics New Zealand said today. The last time the CPI showed two consecutive quarterly falls was in the December 1998 and March 1999 quarters. More>>

ALSO:

Scoop Business: NZ Broadcasters Launch Battle Against Global Mode ISPs

New Zealand broadcasters have confirmed they’ve launched legal proceedings against internet service providers who give customers’ access to “global mode”, which allows customers access to offshore online content, claiming it breaches the local content providers’ copyright. More>>

ALSO:

Sanford: Closure Of Christchurch Mussel Processing Plant Confirmed

The decision comes after a period of consultation with the 232 staff employed at the Riccarton site, who were told on 9 April that Sanford was considering the future of mussel processing in Christchurch. Recent weather patterns had impacted on natural spat (offspring) supply... More>>

ALSO:

Price Of Cheese: Dairy Product Prices Fall To The Lowest This Year

Dairy product prices fell in the latest GlobalDairyTrade auction, hitting the lowest level in the 2015 auctions so far, as prices for milk powder and butter slid amid concern about the outlook for commodities. More>>

ALSO:

Houston, We Have An Air Route: Air New Zealand To Fly Direct To The Heart Of Texas

Air New Zealand will fly its completely refitted Boeing 777-200 aircraft between Auckland and Houston up to five times a week opening up the state of Texas as well as popular nearby tourist states such as Louisiana and Florida. More>>

ALSO:

Scoop Business: Reserve Bank’s Spencer Calls On Govt To Rethink Housing Tax

The Reserve Bank has urged the government to take another look at a capital gains tax on investment in housing, allow increased high-density development and cut red tape for planning consents to address an over-heated Auckland property market. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news