Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Equity Bottom-Up

No-moat-rated JB Hi-Fi remains overvalued, trading at a 34% premium to our unchanged AUD 21.50 per share fair value estimate. JB Hi-Fi has an impressive track record of increasing sales and earnings, posting a solid 5.4% same-store sales increase in fiscal 2016. We believe a significant part of this recent growth was underpinned by a one-off event: the closure of Dick Smith’s physical store network in the second half of fiscal 2016. Dick Smith reported sales of AUD 1,320 million in fiscal 2015, which is largely being divided up between the remaining players.The positive momentum has likely continued in JB Hi-Fi’s favour in the first half of fiscal 2017, with an increase in like-for-like sales of 8.3% in the first quarter. We forecast fiscal 2017 headline sales to grow by 11%, excluding the contribution from The Good Guys. However, the Dick Smith effect is likely to dwindle in the second half and then act as a more challenging base to cycle against in fiscal 2018.Analyst: Johannes Faul, CFA

No-moat-rated JB Hi-Fi remains overvalued, trading at a 34% premium to our unchanged AUD 21.50 per share fair value estimate. JB Hi-Fi has an impressive track record of increasing sales and earnings, posting a solid 5.4% same-store sales increase in fiscal 2016. We believe a significant part of this recent growth was underpinned by a one-off event: the closure of Dick Smith’s physical store network in the second half of fiscal 2016. Dick Smith reported sales of AUD 1,320 million in fiscal 2015, which is largely being divided up between the remaining players.The positive momentum has likely continued in JB Hi-Fi’s favour in the first half of fiscal 2017, with an increase in like-for-like sales of 8.3% in the first quarter. We forecast fiscal 2017 headline sales to grow by 11%, excluding the contribution from The Good Guys. However, the Dick Smith effect is likely to dwindle in the second half and then act as a more challenging base to cycle against in fiscal 2018.Analyst: Johannes Faul, CFA

JB Hi-Fi's Margin Growth Kept in Check by Secular Changes and Competitive Forces

JB Hi-Fi Ltd

JB Hi-Fi's Margin Growth Kept in Check by Secular Changes and Competitive Forces