Citi upbeat on Michael Hill after jewellery retailer Bevilles buy; hikes PT

Michael Hill International

03/05/2023 22:41

** Analysts at Citigroup say Australian jewellery retailer
Michael Hill International Ltd's  MHJ.AX  acquisition of
jewellery and watch retailer Bevilles is low-risk, offers growth
options, and is earnings accretive
    ** Citi hikes PT on MHJ to A$1.28 from A$1.21, retains "buy"
rating
    ** MHJ on April 19 announced deal to buy Bevilles for a net
enterprise value of about A$45.1 mln ($30.1 mln), with the
business expected to generate between A$60 mln and A$65 mln in
FY23 sales 
    ** Brokerage says size of acquisition means earnings
accretion is material, yet not so large where MHJ has to take on
material debt
    ** Says co-existence of Bevilles and MHJ stores in same
locations allows MHJ to capture more customers; does not see
risks of cannibalisation
    ** "Bevilles' product offering appears sufficiently
differentiated to avoid cannibalisation" - Citi
    ** MHJ targets adding up to 64 new Bevilles stores by FY28;
Citi says rollout justified given Bevilles' low penetration vs
its competitors and transfer of ownership
    ** Brokerage hikes FY23 core net profit view by 28.1% to
A$45.2 mln, and by 10.7% to A$39.7 mln for FY24

    
($1 = 1.4988 Australian dollars)

 (Reporting by Sameer Manekar in Bengaluru)
 ((Sameer.Manekar@thomsonreuters.com; Twitter: https://twitter.com/sameer_manekar))