This is not investment advice and is general in nature. Do your own research before taking any positions in the securities listed below
$BBN - Talk about operational deleveraging
Blind Freddy could see that this was a poor result, however, I found the following parts interesting:
To lure a new CEO after Matthew Spence, they “took a bath” on some marketplace, store & personnel capex which could have arguably been delayed
There remains to be some upside in their transition to warehouse-held inventory to lower the cost of CODB and marketplace to boost sales. This all being said - I do not think it will get back to <30% CODB imminently
Operationally they still have a number of sources of weakness such as:
Expensive fit-out costs vs. other retailers
Difficulty in using Gift Certificates and $ credits
Lack of cross-selling for an omnichannel retailer (i.e. order history online does not sync with in-store)
Conclusion: $BBN remains a smaller holding but I am not selling simply due to capex in a 6-month period and higher CODB. This being said – I would say there is a >70% chance of more disappointments from here with execution risk (e.g. new store, software and marketplace risks)
$AMP - Pounds in front of a steamroller
The obvious reason why you want to puke when you see $AMP's results are:
The NIM of their high-volume bank is very low (e.g. 140bps vs. CBA at >190bps)
Their platforms business is fragmented, particularly prior to sales, so it can be hard for the investor community to get their head around China Life/PCCCP mandates
The Wealth Management platform is a beast, but the Net Income Ratio is high so there is not a lot that trickles down
The reason why I think it is not as much of a disaster as you would think are:
Following the share plummet, they are back to being at 20% discount to book
Over FY23, the company will probably provide buybacks & dividends totalling $750m
The rhetoric continues to be focused on selling platforms & cutting costs; not growth. Important given that I would not trust this company with growth avenues
Master Trust component of their Wealth Management business is performing well
Growing AMP Banks NIM (an upside from here) should be easier than winning new mandates
Conclusion - I think there is an upside from a A$3.4bn valuation simply if they do buybacks, cut costs on the bank side and keep the Master Trust business ticking over. This is not a multi-year compounder and reading AMP's Glassdoor reviews is never appealing... however I think there's less downside from here than some other stocks in the market
$LFS - I would run for the hills
Even though I do have preconceived ideas about how consumer credit will go in a downturn, there are specific thoughts I had about their result
NCOs were super low (2.75%) and this conflicts with what US peers are experiencing (e.g. $ALLY consumer has NCOs of 5.4%). Whilst we do not mimic the US; I consider it unlikely that it will continue
Cash NPAT was down significantly; despite parts of their business being beneficiaries of travel (e.g. 28 degrees)
High NIM products (e.g. SocietyOne) were generally discounting given their heightened cost of funds
They are using a dividend cut to recapitalise the bank after declining margins/cash NPAT
Conclusion - My concern with this company's result is 3-fold:
NCOs are too low
They cannot fully pass on their growth in the cost of funds for all products
KKR could do a take-private if the share price tanks, currently 7.5x, whereas Somers/Pepper would be less likely to do that to employees
I would not go out and short $LFS but I would not be in there.
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