MM has liked NCK over the years and remains particularly keen on their foray into Europe via Fabb Furniture – a small spend to gain an established, albeit small 20-store foothold into the UK’s $24bn furniture market. One of the key aspects in CARs result yesterday was growth being achieved overseas;
- CAR has evolved its dominant Carsales.com business in Australia and successfully grown offshore. Only 41% of group revenue was from Australia last year, down from 72% in FY19 as the company successfully spreads its wings.
- When entering a new market, CAR starts with a minority stake in an incumbent player to “test the waters,” and then, depending on the results, it will take full control, etc.
There is some definite common ground between CAR’s successful global expansion and NCK’s recent entry into the UK. They adopt a prudent, sensible start rather than an “all-in” foray into pastures new hence, if it doesn’t go according to plan, the balance sheet damage is manageable.
- Last week, NCK announced an inline profit result and a final dividend of 33cps fully franked, which was ahead of expectations.
The shares were initially sold off due to two factors; the pace of the store rollout (a key driver of future growth) is running below expectations, while it also looks like July sales have been on the weaker side, however, the shares have recovered and the stock looks good.
- We like NCK initially targeting fresh highs above $16.
MM is bullish on NCK
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