It certainly has been a positive day of trade for the Noni B Limited (ASX: NBL) share price.
In late morning trade the fashion retailer’s shares have rocketed almost 19% higher to $3.05.
Why are Noni B’s shares rocketing higher?
The fast-growing retailer is holding its annual general meeting in Sydney today and ahead of the event the company released its presentation to the market.
The presentation began with a reminder of how incredibly eventful the last two years have been Noni B and its shareholders.
In FY 2017 the company acquired the Pretty Girl Fashion Group. This trebled the size of the company and grew its store network from 200 stores to 614 stores.
This bold move proved very successful and led to a 324.9% increase in underlying pre-tax profit in FY 2018.
Another bold move was made late in FY 2018 when the company acquired the Millers, Katies, Crossroads, Autograph, and Rivers brands from Specialty Fashion Group Ltd (ASX: SFH).
This acquisition more than doubled the size of the company and increased its store network to over 1,400 stores, putting it in a position to generate close to $1 billion in sales this year.
But not only will it boost sales, Noni B’s chairman, Mr Richard Facioni, believes the benefits this sort of scale brings are significant.
Pleasingly, he advised that the “integration of the Specialty Brands is progressing ahead of expectations and we are confident the acquisition will indeed materially enhance shareholder value.”
So much so, the brands look set to be EBITDA positive in FY 2019. Management had aimed to make the loss-making businesses break-even on an EBITDA basis, but annualised merger benefits of $30 million have been achieved since the acquisition, well ahead of expectations.
Furthermore, it believes it has identified further annualised savings of up to $20 million, which are expected to be achieved by the end of the 2019 financial year and fully reflected in FY 2020.
In light of this, management advised that EBITDA for the first half is expected to be consistent with consensus estimates, in the range $25 million to $30 million.
However, full year EBITDA is expected to exceed consensus estimates. It anticipates full year EBITDA of around $45 million. This will be a significant increase over the historical performance of the combined businesses and is “reflective of the excellent work the Noni B management team has done in integrating the Specialty Brands.”
Should you invest?
I think that Noni B is one of the best-run retailers in Australia and its performance over the last couple of years ought to be commended.
The good news is that despite its gain today, I don’t believe for a second that it is too late to invest. At just 13.5x trailing earnings and offering a trailing fully franked 4.3% dividend, I think Noni B’s shares offer a compelling risk/reward.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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