S&P/ASX 300 Index (ASX: XKO) stock Nick Scali Ltd (ASX: NCK) may not operate in the most glamorous sector, but the stock has been amply rewarding its longer-term shareholders.
Shares in the furniture retailer closed up 0.8% on Friday at $15.66. That sees the Nick Scali share price up 24.6% over 12 months, or more than double the 11.8% one-year gains posted by the ASX 300.
And that's not including the 68 cents a share in fully franked dividends Nick Scali paid out in 2024. If we add those back in, then the accumulated value of the ASX 300 stock is up 31.2% since this time last year.
With that background in mind, here's why Airlie Fund Management's Will Granger maintains a bullish outlook for Nick Scali for the years ahead.
Why this fund manager is bullish on the ASX 300 stock
In the Airlie Small Companies Fund quarterly update, Granger shared his insights on Nick Scali, a company that the fund holds.
"One of the investments we're particularly excited about is Nick Scali, despite furniture retailing not being the most glamorous sector," he said.
Granger pointed to the lengthy outperformance the ASX 300 stock has delivered to patient, long-term shareholders:
Nick Scali has an impressive track record, delivering more than 30 times the initial investment since its listing in 2004. This performance is more than ten times the return of the index over the same period.
Granger said that Nick Scali's acquisition of Fabb Furniture, announced to the market on 24 April, opened the door to the United Kingdom furniture market.
This could support the ASX 300 stock moving forward.
Granger noted:
The acquisition cost is relatively low, at around $50 million, or 5% of Nick Scali's market cap, limiting downside risk. Management has a proven ability to create value through acquisitions, as seen with the successful integration of Plush Furniture in 2021.
The strategy for Fabb Furniture involves leveraging Nick Scali's supply chain and establishing a strong store network, a playbook that has worked before.
Granger also said that Nick Scali's "robust" balance sheet offers "significant cash reserves and property assets, providing ample funding" for the company's expansion into the UK.
"The UK furniture market is twice the size of Australia's, offering substantial growth potential," he said.
But, according to Granger, investors haven't fully factored in this growth potential for the ASX 300 stock.
He explained:
Despite these promising factors, the market has not fully priced in the UK expansion, presenting an attractive opportunity.
While it may take a few years for the UK venture to show results, we remain optimistic and patient holders, confident in the long-term prospects of the business.
