Group 7 BSB 107 Stock Pitch

Summary

Sam and Tom, along with a team of junior analysts, present an in-depth analysis of two prominent Australian retail stocks: Premier Investments and Kathmandu Holdings. The team examines each company's history, strategies, and future prospects, highlighting Premier's strong online sales growth and Kathmandu's sustainability efforts. They also address the uncertainties both companies face, including leadership changes and market recovery post-COVID. The analysts conclude that Premier Investments may be overvalued, while Kathmandu Holdings is significantly undervalued with strong potential for future growth, positioning it as an attractive investment opportunity.

Takeaways

• 📊 Premier Investments and Kathmandu Holdings, two major Australian retail stocks, were analyzed in a detailed review led by the BSB107 analyst team.
• 📈 Premier Investments has a large market cap of $3.92 billion and owns brands like Peter Alexander, Smiggle, and Justine, along with a 28% stake in Breville Group.
• 🌍 Kathmandu Holdings, with a market cap of $873.5 million, has expanded its portfolio through acquisitions of Rip Curl and Oboz, driving its growth in outdoor and adventure apparel.
• 💻 Premier Investments' shift to a strong e-commerce strategy, especially during the pandemic, has boosted online sales significantly, showcasing successful risk management.
• 👔 Richard Murray, former JB Hi-Fi CEO, has been appointed as Premier Investments' CEO, adding strong leadership to the company’s future growth prospects.
• 🌱 Kathmandu focuses on sustainability, utilizing eco-friendly materials and practices, aligning with consumer demand for environmentally conscious products.
• 📦 The acquisition of Rip Curl has expanded Kathmandu’s market reach, adding patents and technologies like e-bomb wetsuits, while growing their wholesale presence.
• ⚠️ Premier Investments faces liquidity challenges, with a lower-than-ideal current ratio of 1.25 compared to the industry benchmark of 1.69.
• 💼 Kathmandu's leadership instability, including a long vacancy in the CEO position, has been a major concern, but they recently appointed Michael Daley as CEO.
• 📉 Both companies are navigating post-COVID economic recovery, but Kathmandu is viewed as severely undervalued with high growth potential over the next 5-10 years.

Q & A

What companies were analyzed in the presentation?

The companies analyzed were Premier Investments and Kathmandu Holdings, two prominent retail stocks in Australia.

Who are the key team members involved in the investigation?

The key team members are Sam, Tom Thorpe (IT and data analyst), Joseph Busser (research and forecasting expert), Cooper, and Sam, who focused on financial innovation and trend analysis.

What are the primary businesses under Premier Investments?

Premier Investments owns Just Group, which includes brands like Peter Alexander, Smigiel, Justine, and more. They also hold a 28% stake in the Breville Group.

What are the main brands under Kathmandu Holdings?

Kathmandu Holdings owns brands such as Kathmandu, Rip Curl, and Obos, focusing on outdoor gear, sports, and lifestyle products.

How has Premier Investments capitalized on e-commerce growth?

Premier Investments has heavily invested in online infrastructure, developing a fully integrated online channel and a distribution center. Their online sales reached $220 million in 2020, up 49% from the previous year.

What sustainability initiatives has Kathmandu Holdings undertaken?

Kathmandu Holdings has emphasized sustainability, introducing initiatives like fully solar-powered stores, using 100% sustainable materials, and saving 40 million liters of water with eco-friendly dyes.

What challenges do Premier Investments face?

Premier Investments faces challenges with liquidity, having a current ratio of 1.25:1, which is below the industry benchmark. There's also uncertainty around whether their new CEO, Richard Murray, will replicate his previous success.

What recent acquisition has driven growth for Kathmandu Holdings?

Kathmandu Holdings' acquisition of Rip Curl has significantly driven growth, adding patent technologies, exclusive products, and expanding their wholesale reach to 5007 stores.

What is the forecasted growth rate for Premier Investments and Kathmandu Holdings?

Premier Investments is expected to grow at 15.39%, while Kathmandu Holdings is forecasted to grow at 32%, with much of the growth dependent on the recovery of the travel industry.

What are the intrinsic values per share for Premier Investments and Kathmandu Holdings?

The intrinsic value for Premier Investments is estimated at $22.71 per share, while Kathmandu Holdings is undervalued with an estimated worth of $3.80 per share, compared to the current price of $1.42.