Afternoon Report / Nick Scali hit despite strong numbers

By Market Matters 10 August 17

Nick Scali hit despite strong numbers

Market Matters Afternoon Report 10th August 2017


A strong open by the market this morning however the sellers started to dominate from around midday and the market fell around 60pts from the highs. The IT sector led the way while most weakness was felt amongst the Utilities plays which declined by 1.12% - an overall range of +/- 48 points, a high of 5795, a low of 5747 and a close of 5760,  up -4pts or -0.08%.

ASX 200 Intra-Day Chart

ASX 200 Daily Chart

Nick Scali – a good result today even though the market thought otherwise with the stock being sold off on the session. They beat market expectations with NPAT +42% to $37.2m, ahead of guidance of $36m-$37m,  and beating consensus of $36.5m.  Final dividend of 20.0 cps declared (ff), taking FY DPS to 34.0cps – above expectations. Clearly the operating environment is becoming tougher for retailers however NCK is doing everything right with a simple story to tell and on a FY18 PE of ~15x, NCK is trading below the retailer sector peer average - and is cheap relative to the market.

Their outlook was typically conservative, noting that same store sales order growth in FY18 will be “challenging” and this was supported by trading in July which was  flat relative to pcp – this is probably the reason for the weakness in the stock today however we did see a big bounce from the lows ($5.71) to close at $6.10 – however that was still a decline of 8.41% today. Interestingly, there was some BIG volume through today with 900k shares crossed in the afternoon around $6.09. We mentioned yesterday that this is a very well owned stock – and a lot of the smaller cap managers love it, which does open it up to some potential downside, in this case, the outlook seemed to be the issue.

Nick Scali  Daily Chart

AMP – delivered results  today that were around about inline with market expectations however the stock dropped by -2.59% after they announced plans to pause the buyback it announced in February to give flexibility and to reinvest for growth – with a focus on their international business and the SMSF market. AMP is managing costs well, fund flows were strong and management are continuing to de-risk the earnings in the wealth protection business, however it’s hard to get excited over this ‘old world’ stock. We actually think that pulling the buy-back is a good move in the medium term even if the market dislikes it in the short term – investing for growth is what we want our corporates to do even if AMP is likely to take a long time to see the benefits. That said, we have no interest in AMP at current levels. The stock closed down -2.59% today at $5.27.

AMP Daily Chart

Have a great night

The Market Matters Team

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Disclaimer

All figures contained from sources believed to be accurate.  Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy.  Prices as at 10/08/2017.  5.00PM.


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