Stock Quickie – SUL:ASX

Super Retail Group – SUL:ASX

Investment Premise

I was looking for defensive stocks, and they were mentioned in a basket along with WES, WOW, SCG, SYD. They own a number of brands/shops that may be well placed to capitalise on the “captive” post corona populace of Australia. 

What do they do?

They own the following retail brands: 

Weighing machine

Current return on equity (ROE) sits between 9 and 13% (factoring in recent Corona share dilutions, ~30% more shares) and low, but stable, margins (4-5%). The debt ratio is reasonable, managed between 40-50%. Growth is normal at around 7% with a high dividend yield (>5%). With the added insider ownership at 29.9%, I’d classify this as a “solid company”.

On a timescale, they have also managed to grow sales and book value consistently and slowly for the past 10 years. 

Voting machine

They aren’t particularly popular, currently trading at about 11xPE. Historical range fluctuates between 10-21, so they’re at the low end of the range, but the threat of online retail begs the question; Are they likely to become more popular?

Other options

WOW, COL, WES, JBH, KMD, SSG

Worth looking further?

I don’t think so. My main worry is that the brands represented are mostly at the commoditised end of the spectrum, and are easily poachable by online sales. None of their brands have much to differentiate them from competitors, other than being cheap. That said, online is cheaper and I would have said that a few years ago too, and since then they’ve been doing well. Post-Corona Australia will likely see investment into homes, cars, and local holidays for the foreseeable future, this could be a big tailwind for their sales. But then again, I think there are other companies I’d prefer to use to get access to this (e.g. JBH, KMD).