Wilson Asset Management weekly: Noni B and Reliance

Chris Stott

Portfolio Manager

Overall the reporting season, which concluded on Thursday, was mixed, with a number of companies falling short of market expectations. Companies trading on high price-to-earnings ratios struggled, notably Domino’s Pizza (ASX: DMP) and Corporate Travel Management (ASX: CTD). The defensive sectors had one of their worst reporting periods in a decade, led by Telstra (ASX: TLS), which surprised the market with a significant reduction in its dividend guidance for the year ahead.

The rebound of the resources and mining services sectors was a standout story, outperforming analysts’ expectations. We were particularly pleased to see BHP Billiton (ASX: BHP) deliver a strong result and announce its decision to realise the value of its on-shore oil assets. We have also seen positive results from Seven Group Holdings (ASX: SVW) and WorleyParsons (ASX: WOR), which we own. In this week's report we provide a brief summary of Noni B and Reliance's results.

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Market overview

The S&P/ASX All Ordinaries Accumulation Index closed up 0.8% for the month of August, and ended the week flat. On Tuesday, reports of the North Korean missile fired over Japan test sent global equities tumbling, however the reaction was relatively short lived and the market recovered quickly. On Wednesday, the Australian dollar jumped after building approvals and construction data released by the Australian Bureau of Statistics (ABS) was stronger than expected. 

Noni B we rate A+

On Monday, fashion retailer Noni B (ASX: NBL) announced its full year results, reporting a 275% increase in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) driven by a turnaround in the Noni B business and the acquisition of the Pretty Girl fashion chain announced in August 2016. We believe Noni B was one of the standout results during reporting season. Shares in Noni B closed up 15% for the week. We own Noni B as a research-driven investment in WAM Capital, WAM Research and WAM Microcap.

Reliance taps into profit

On Monday, Reliance Worldwide Corporation (ASX: RWC) announced its full year results with EBITDA increasing 21.8% to $120.7 million along with net sales up 12.6% to $601.7 million. We believe Reliance will continue to grow and transform the global plumbing industry following its recent acquisition of Holdrite. Shares in Reliance closed up 7% for the week. We own Reliance as a research-driven investment in WAM Capital, WAM Leaders and WAM Research.

 


Chris was the Chief Investment Officer of Wilson Asset Management, having joined the company in 2006. He was also the Portfolio Manager responsible for WAM Capital (ASX:WAM), WAM Research (ASX:WAX), WAM Active (ASX:WAA) and WAM MicroCap (ASX:WMI).

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