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Why Myer Holdings Ltd and STW Communications Group Ltd are good buys NOW

Myer Holdings Ltd (ASX: MYR)

In the early 1980s Myer was in a spot of bother which led to Solomon Lew taking a significant stake in the company and eventually becoming chairman (then Coles – Myer). In effect Lew was a white knight and had the full support of the Myer family. His entrepreneurial style of management may have saved the company but it also ended in him being voted off the board in 2002.

Since then Myer continues with a chequered history and now sells at about 50% of the price ($4.10) private equity obtained when relisting in 2009. No wonder investors are a bit scratchy, however value is there for the patient amongst us.

Taking a conservative view I expect Myer’s profit to fall 20% in the current 2014 year. Although unseasonal weather and reluctant consumers are playing their part Myer has some specific problems of its own – several stores are undergoing refurbishment and a couple have been closed. However profits and sentiment are expected to steadily improve as new stores are added to the portfolio and refurbishments complete. Recent operational initiatives should also be bearing fruit.

Taking this into account 2015’s earnings are estimated to increase by 6%, placing Myer ($2.05) on a projected 2015 price earnings multiple of 11 and a fully franked yield of 7.3%. In my view sufficient downside risk is already priced into this stock.

STW Communications Group Ltd (ASX: SGN)

With its fingers in multiple pies STW Communications is a leading advertising / marketing / design / production / research-orientated media services company. In effect STW is a good proxy for anything to do with commercial media whether digital or physical.

Following a quiet 2013 (STW has a December year end) 2014 has seen a sluggish start although this industry only gets up steam in the second calendar half. STW continues to develop an Asian presence which is now gaining traction. On balance earnings are forecast to grow by 4%+ this year.

Net debt to equity is 22% and STW Communications ($1.33) sells at a projected 2014 yield of 6.8% fully franked.

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Motley Fool contributor Peter Andersen owns shares in Myer Holdings