GUD Holdings (GUD) owns and manages a diverse group of businesses selling branded manufactured products in Australia and New Zealand. The company operates several of Australia’s most established and well-recognised consumer and industrial brands, including Sunbeam appliances, Ryco filters, Davey pumps and Oates cleaning accessories. The stocks trading on an 11x FY24e P/E as the market continues to price in earnings downside risk and/or balance sheet risk. In our view, GUD can deliver against relatively conservative FY23/24e consensus expectations.
We believe the balance sheet risks are heading in the right direction and as gearing gradually reduces from decent earnings growth we think GUD’s multiple can re-rate towards peer group levels (avg. currently 16x FY24e P/E) making the risk/reward very attractive into any pullbacks. Quarantine backlogs have not fully cleared meaning some volume is simply being delayed i.e. the average wait time for the top-10 highest-selling models APG services still sits at ~160 days which leaves plenty of room for improvement operationally.
- We like the medium outlook for GUD although it needs to maintain February’s solid earnings report which saw a +55.7% lift in revenue.
- The above-mentioned 1H23 result was in line with consensus illustrating how the stock is currently priced for disappointment.
