Viewpoint: Bullish
Zip was the best performer of the top 200 at times of writing today (1.08pm), out with their 2nd quarter update today which shot the lights out on the back of a bumper holiday period.
Transaction volume more than doubled the same last year with December alone printing $628m. While Australia & New Zealand remains the main contributor to transactions, growth in the US is outpacing with the company calling itself the one of the fastest growing US BNPL options, adding more than 40% of customers in the US. International opportunities will continue to be the main growth driver for Zip, now turning their attention to the UK where it launched in December.
Super Retail Group owns brands such as Rebel, BCF, Macpac & Super Cheap Auto. We think the momentum behind Australian retail remains strong and with savings rates at record levels, spending should increase as confidence builds post pandemic.
SUL remains cheap & with decent upside, we are therefore adding it to the Income Portfolio around $11.90 give or take, with a 4% portfolio weighting. We view this as a moderate risk stock and plan to hold over the medium term, although markets are fluid and this can change.
Super Retail Group (SUL) operates a chain of retail stores throughout Australia. The Stores sells a wide range of automotive parts and accessories, tools, camping products, gardening and outdoor equipment and boating equipment throughout Australia and New Zealand. Brands include Macpac, Rebel, Super Cheap Auto & BCF
APT closed at a new record today with Jefferies calling for $153.08 out of the stock in the next 12 months. The bullish stance was built on Afterpay’s expansion into Europe and Asia on the back of a successful push in the US. The analyst also expects margins to improve over time on ever growing TTV. The price target is only a stone’s throw away. Shares were up +5.22%
December quarter production numbers out today and they were soft, although that trend had been well flagged in the September update. Importantly however, they maintained full year production guidance for all divisions and pushed through a slight upgrade to Petroleum. All in all, BHP remains on track to deliver a strong set of numbers when they report in February. We hold across 3 of the MM Portfolios.
Megaport (MP1) -1.31%: The stock was down today after providing a business update this morning while outlining the appointment of a new Chief Revenue Officer to be based in the US. In terms of the business update, they talked a big game and the business is growing, however growth rates are a shade below where we were hoping they would be. Todays update showed top line sales increased by 8% on the quarter and 35% YoY however that has them doing~ $80m sales for FY21, around a $4m miss to expectations. In any case, Monthly Reoccurring Revenue (MRR) continued to expand, again, at a slightly more modest rate than we thought they would. We remain holders for now in the growth portfolio.
Tyro Payments (TYR) +25%: Had a day out today after refuting the various claims made in a short seller report released on Friday. As mentioned in a few reports of late, Tyro’s payments systems have been plagued with issues over the past few weeks causing, in their words, around 20% of terminals to be offline. The short seller report came up with a number closer to 50%, along with a number of other issues including that the fault fell on Tyro’s software update, there was a lack of communication with users, that Tyro caused issues with Westfield gift cards as well as claims Tyro was using deposits to support business cashflows.
Tyro was out strongly rebutting each of the points made in a reasonably succinct update. They also expect all terminals up and running again by weeks end. They certainly won this round, and the short squeeze helped the stock recover at least last week’s selling, but the dance is unlikely to end there. The hit to reputation will be significant, and Tyro tends to work without lock-in contracts so impacted users likely would have switched to competitors such as US listed Square. We like Tyro still though, backing it to do well out of the corner. It’s in a similar spot to Seek (SEK) a few months ago when it came under fire from short sellers, now the stock is trading around 25% higher.
On-line retailer Kogan helped me purchase my Christmas presents on time and I have to say the service was excellent. This $2bn company is executing its business model extremely well while enjoying being in the right place at the right time as e-commerce enjoys accelerated growth courtesy of COVID. The growing business now has around 700,000 unique customers and it looks set to maintain its upward momentum. We like KGN for an eventual test of new all-time highs, but management have been known to throw some curve balls to the market hence investors should be cognisant of potentially elevated volatility in the stock. This is a stock that resides in our soon to be released emerging companies portfolio.
Motor vehicle business APE has been the star performer in the sector more than doubling over the last 6-months helped by its recent guidance beat where its now anticipating a ~$200m profit before tax. The company has enjoyed the rebound in vehicle sales which looks well positioned to continue as lease costs remain extremely low.
Gerry Harvey must have enjoyed his stocks almost 50% gain over the last 6-months, as a side note I’ve always liked the way he was happy to step up and buy tranches of his stock when the doubters were circling, he’s clearly a winner today – he even bought $1m worth as part of a 15-stock plunge into local stocks back in March, good call! The shares look poised to breakout to fresh decade highs, in November they announced sales revenue was up close to 30% with Australia not surprisingly leading the way as we’ve dealt with the virus so much better than most people. However, as the vaccine is rolled out its stores in the likes of Europe, Singapore and Malaysia are likely to play some catch up.
