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Growth Portfolio: Myer Holdings Limited (ASX: MYR)


Published 28-MAR-2017 00:00 A.M.


2 minute read

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Overview: Myer Holdings Limited ("Myer", "the Company") is an Australian department store company focused on retail products. Myer’s stores offer a diverse range of consumer products including fashion and apparel, homeware, electrical goods, and general merchandise. The Company owns and operates 67 stores across Australia as well as its online digital and mobile platforms.

Catalysts: Steady sales and a reduction in capital expenditure are expected to have a positive impact on earnings margins. Recent management changes and a strategic shift geared towards operational improvements provide a platform to turn around one of Australia’s most iconic companies. Myer has made good progress in significantly reducing its debt and a return to sustainable EBITDA growth is a major value driver and could reinvigorate market confidence. We note an increase in corporate activity.

Hurdles: Earnings per share (‘EPS’) have declined over the past six consecutive years and there is no guarantee that the trend won’t continue. Myer’s operations are capital intensive and the Company competes against online stores with significantly lower fixed costs and higher operational leverage. Myer has failed to respond to industry trends over the past few years, which has impacted financial performance and sentiment towards the brand.

Investment View: Myer offers profitable exposure to Australian consumer trends. We are attracted to the Company’s improving balance sheet, a renewed focus on cost control, and recent management changes. However, Myer operates in a mature market characterised by high competition and capital-intensive operations, which has impacted margins. While sales have been steady, a return to sustainable EBITDA growth is the primary driver for the stock and as the balance sheet improves, Myer may witness an increase in corporate activity. MYR is trading near an all-time low and with over 15% of its stock subject to short-selling, we favour the balance of risk and initiate coverage with a ‘buy’ recommendation.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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