AX1 - Accent Group

[finicky]

Another nasty looking break of support chart ($2). I would guess lower eventually.

Weekly

 

[divs4ever]

I shall have a look, although as someone who burnt a huge amount of capital in SGH your comments gave me palpitations.

SGH was one of those falling knives i reached for and got the knife firmly in my foot ( not an amputation , but a NASTY , vivid lesson of what can go wrong , especially when my instincts were screaming DON'T do it )

i did recover a small part of the capital , but i did know better ( than to buy into law firms ) , but did it anyway

but that said i did recoup any losses when XIP was taken-over

now i bought AX1 when it was RCG ( back in June 2014 ) rescued the investment cash in June 2015 ( maybe a bit early in hindsight )

and in my view AX1 has been the ( delightful ) surprise packet in the virus saga , you had dozens of reasons of why sales should drop ( lock-downs , schools closed , sports events cancelled , work from home , health activities restricted , shopping centres deserted , etc etc , ) and i for one would NEVER buy shoes online , but it seems the public largely disagreed

so to see this come through is pretty fair condition was a happy outcome for me

but would i buy more of AX1 above say 70 cents , probably not , but time will tell

IN THEORY this business should be an indicator of a genuine retail recovery

 

[finicky]

Big management purchases on-market recently, particularly non exec director Brett Blundy who purchased almost 9 million shares. He's a billionaire though, so perspective.

Brett Blundy
4,000,000 shares buy @ 1.28
13 May on-market

Brett Blundy
4,960,000 shares buy @ 1.27
9-10 May on-market

Also the CEO D. Agostinelli
162,000 shares buy @ 1.33
11 May on-market

Chance that the chart has put in a low but early days; it's not out of its downtrend channel yet. It is shaping up as a monthly hammer candle so far for the very incomplete month of May.

Staunch dividend payer, book value slow growth, most recent lowest ROE was 10.5% in fy17 which would suggest to me that it is worth at least 2x book value, which equates to a price of ~1.60. Not a big discount in such uncertain times.

Daily

 

[divs4ever]

i will have to watch this closer , there might be a chance to add more ( cheaper than my original buy )

cheers

 

[finicky]

Pretty sure I'd be buying a tranche of these if any of my specs had flourished so that I could part liquidate some for cash to redeploy into earners. The past 8 years of fundamental performance for Accent has been excellent I think, with rising book value over 8 years and even rising Return on that book value (ROE) for the last 5 years ending fy21. This financial year should break the positive trend however.

The past update in April, while subdued and implying lower earnings, was not alarming, to my ears anyway, but uncertanities were sufficient that they could not commit to fy22 profit guidance.

My notions on the chart - the price has moved out of the more severe downtrend best fit line and I still suspect the low was put in just off 1.20. Price has already beaten the last peak of the downtrend but pulled back. The low of ~1.20 has pretty much met my target from the sloping neckline of an irregular H&S top (Dec'20 - Feb'22)

Trading update (from back in late April):
"Sales performance from late February has improved over the -10% LFL reported for the first
eight weeks but remains subdued compared to expectations. The Company has continued to
focus on a full price, full margin sales strategy, which has driven an improved gross profit %
ahead of both expectations and last year. Overall inventory levels are in line with plan,
although the Company continues to experience some delays and cancelations from third party
brand partners.
Given ongoing uncertainty, the Company has maintained its decision not to provide forward
sales or profit guidance for H2 FY22 or the full year FY22."

Not Held

Daily

 

[divs4ever]

these are a lot like APE ( i hold both AX1 and APE without investment cash risk )

both have a thousand different reasons ( seemingly ) why they should be struggling now ( and in the near future ) but somehow get the books into shape ( even the occasional acquisition )

BUT there is always a chance the wider economy will melt-down , so must be treated as 'higher risk ' than some ( like WOW or WES )

 

[finicky]

BUT there is always a chance the wider economy will melt-down , so must be treated as 'higher risk ' than some ( like WOW or WES )

Yes agree.
I was looking at Reece (REH) just now. That's always been viewed as a safe bet* pretty much, but has also always traded at a large premium to intrinsic value. *susceptible to builders going bankrupt and interest rate hikes I guess, so not in the league of WOW or WES.
Decided against REH as a candidate because it still seems overvalued to me despite the steep fall in price. Also the chart of REH looks like a > 50/50 possibility of lower to my eye.

 

[divs4ever]

Yes agree.
I was looking at Reece (REH) just now. That's always been viewed as a safe bet* pretty much, but has also always traded at a large premium to intrinsic value. *susceptible to builders going bankrupt and interest rate hikes I guess, so not in the league of WOW or WES.
Decided against REH as a candidate because it still seems overvalued to me despite the steep fall in price. Also the chart of REH looks like a > 50/50 possibility of lower to my eye.

unusual times currently ( all over ) but SOME companies will be buffeted less , am just not sure who they are this time

normally i would be looking for something like BXB but there must be millions of pallets stranded in stalled shipping containers or companies with heavy exposure to government contracts ( but surely governments must face austerity soon )

i had pinned my hopes on API but then WES moved in and acquired them ( and several other 'boring but profitable companies have been bought up as well )

the climate agenda may easily strangle industry and construction ( and possibly mining )

 

[finicky]

Just lost an elaborate explanation of why I think AX1 is still worth at least $1.60 fair value on guidance released today of mid-range EBIT of $62Mn for FY22.
Technical glitch on the ASF platform which told me to press 'back' and 'refresh' which succeeded in vanishing my post.
Anyway upshot and big news is that I bought an AX1 starter pack at $1.365

 

[finicky]

So my notions on the current intrinsic value of AX1 rest on a comparison between estimated FY22 EBIT of $62Mn, just guided by the company, and the only comparable year's EBIT on Commsec which is FY18 of $65Mn.

FY18 ROE = 11%
FY18 Book Value = 0.73

But

FY22 est Book Value = 0.80 approximately, so
FY22 ROE therefore = (73 ÷ 80) x 11% = 10%

So I figure a Return on Equity of 10% for a quality company (based on excellent historical performance) is worth better than 2 x Book Value.

2 x 0.80 (BV) = $1.60 intrinsic value
Which admittedly leaves out a number of inscrutable complicating factors that are way too niggly for me. Also this ignores macro factors that are eventually going to smash the prices of everything presumably.

Held

 

[Knobby22]

My pick for the monthly competition.
Today's drop won't last. Hope for a decent rise in August.

 

[finicky]

Obviously the buyers like the FY22 report on Friday but if you based the valuation on FY22 results alone the share price would be expensive on a PE of 29 and ROE of only 9% on book value of 0.81.
But there's good reason to think that performance will bounce back in FY23 and future years, caveat extraneous events. The company reiterated that they lost a lot of sales due to 400 Covid store lockdowns in H1 and a drop in margin of 190bp was Covid related.

The full year FY22 dividend yield is still 3.8% on the reduced performance but say If the dividend reverts to that paid in FY21 the yield will be 6.7% ff on the current price.

My sense is that the chart might pull back if it reaches the 1.70s zone as it is getting towards overbought on the daily chart and is at the end of a measured move compared with the rally off the bottom. But definitely a dividend hold investment for mine for the small amount that I bought.

Held

Daily

 

[divs4ever]

am pleasantly surprised at the resilience of this company

i didn't really expect many folks to buy shoes online ( except collectors ) but am happy to be proven wrong

given the current medical trend ( SADS ) i can't see the sports shoe section booming , but will be happy to be proven wrong again

i bought in @ 66 cents in June 2014 when they were trading under the RCG ticker code , a welcome occupant of my 'bottom drawer '

 

[finicky]

i didn't really expect many folks to buy shoes online ( except collectors ) but am happy to be proven wrong

Yeah divs4ever, they said their digital channel is still growing FY22. I guess if you already know your size for a brand and model it would be fine. I notice from observing someone I know that some people have no compunction generally about returning items for a refund.

 

[divs4ever]

i hardly ever buy shoes ( have been a barefoot guy for decades , so by the time i buy new ones the sizing system has changed AGAIN )

so buying RCG 'as a safe-haven ' play very much amused a trading buddy ( who was a former sales manager )

i try to get the shoe purchase correct the first time , incapacitating injuries to my feet used to limit my income ( limping back to return them is not my favorite past-time )

and have had plenty of feet/ankle damage in the past ( from other activities )

now i am still trying to foresee the consequences of the 'work from home ' trend will that meaningfully decrease shoe sales ??

say 5% less work/dress shoes required ( as office visits will be rarer ) ( but maybe more joggers for the treadmill/exercise bike )

AND the possibility of intermittent supply chain issues ( mainly glitches in the shipping industry )

 

[Knobby22]

Many people buy shoes more as a status symbol. It's replaced watches.
When I need a new pair of runners for gym I head off to Harris Scarfe and spend $50.
If you can find anything uner $120 with Accent it's probably replacement shoelaces, and much of the range is at least $250.

That said, though I expect eps to be much higher next year, it won't get back to pre pandemic levels in the short term as rising interest rates will bite

 

[finicky]

There goes the dividend (by two and a half times) that earlier tempted me to buy a tranche @ 1.37.
Just noticed that another director bought a good whack of shares on market Aug 26 @ 1.65
Tempted to buy more today but not impressed by the daily chart after this break of recent support and anyway feel I've lost my mojo. Considering surrendering my affairs into the hands of a conservator.

Held

Daily

 

[mullokintyre]

There goes the dividend (by two and a half times) that earlier tempted me to buy a tranche @ 1.37.
Just noticed that another director bought a good whack of shares on market Aug 26 @ 1.65
Tempted to buy more today but not impressed by the daily chart after this break of recent support and anyway feel I've lost my mojo. Considering surrendering my affairs into the hands of a conservator.

Held

Daily
View attachment 147035

@finicky , I found a green white and pale blue Mojo lying on the ground in the carpark of Monkey Mia resort yesterday.
Could it be yours??
Mick

 

[finicky]

Its hanging around somewhere. Not on me for sure

 

[divs4ever]

Trading Update
Accent Group Limited (ASX: AX1)
Accent Group Limited (the Company or Group) today provides an update on trade for the
first 18 weeks of FY23.
Total Group owned sales YTD are up 52% compared to FY22. FY23 gross margin % YTD is
up 570 bps on FY22.
Group CEO Daniel Agostinelli said “We are very pleased with trade to date which has been
above expectations. Our continued focus on driving full price, full margin sales has resulted
in strong margin recovery from last year. Our store opening program is on track and we
expect to open around 50 new stores in H1.
Whilst we provide no forward guidance, inventory levels reflect strong deliveries of exciting
new product across all banners, and the Group’s in-stock position along with sales and
operational plans are well set heading into the three most important trading months of the
year.”
The Company advises that H1 FY23 will be a 27-week reporting period ending 1 January
2023 compared to the 26-week reporting period ended 26 December 2021 in H1 FY22.

===========================================================================

DYOR

i hold AX1 'free-carried' ( bought as RCG )

am not sure i can see their enthusiasm ( by opening so many new stores ) in the year to come

maybe they think more folks will be walking ( as opposed to using public transport or driving )