What are MM’s thoughts on SmartGroup & Super Retail Group?
Hi James and Team Can I have your current view on Smartgroup. It has had a good run lately. What price target do you have on SIQ? Also your view on Super Retail. Is it a Hold or Sell?
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Answer
Hi Debbie,
SmartGroup (SIQ) $6.87 – SIQ has rallied strongly from its November low however we believe as Australia braces for the looming mortgage cliff its unlikely this salary packaging and fleet management business will have an ideal economic back drop to push its shares significantly higher through 2023, even though car leases have been improving as supply chain issues fell away. This is a solid business with a good balance sheet but after rallying ~50% we aren’t likely to chase the stock higher in the foreseeable future. It does remain on the Hitlist for our Income Portfolio.
Super Retail (SUL) $12.99 – no real change on what we said on the 11th, SUL is a company MM has liked for a while, it owns Supercheap Auto, Rebel Sport, BCF & others. Last month it beat market expectations with its 1H earnings with sales up 11% and a significant drawdown in inventory which helped margins. In our opinion, the stock is not too expensive trading on a 11.4x valuation plus we like its forecast to yield 6.4% over the next 12 months. If we held, we would be more inclined to stick with it while we would be interested buyers ~$12, conversely a break to new highs above $14 would have us remembering our “buy weakness and sell strength” approach to 2023.
