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Equity Bottom-Up

Stealth Global Holdings Ltd / Equity Bottom-Up

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<p><a target="_blank"></a><a target="_blank"></a><a target="_blank"></a><a target="_blank"></a><a target="_blank"></a><a target="_blank"></a><a target="_blank">Stealth Global Holdings Limited (ASX:SGI) has reported ~15% sales growth in its core Australian operations over 1H20, well above incumbents as it continues to focus on service and participate in national contracts for the first time. Other sales trends were as expected with the BSA (Bisley) JV in the UK building momentum and African sales declining as SGI exits this low margin business. On the earnings front, our key takeaway is that SGI is primed for operating leverage from core sales growth. Our understanding post 1H is that the group’s in-stock position and the relatively unaffected mine/infrastructure sites around the country have had minimal impact on trading to-date. Similarly in a statement released 19 March, Wesfarmers highlighted that its Industrial &amp; Safety division was "experiencing strong demand for critical projects including essential protective clothing, cleaning and hygiene products and medical gases, offset by some weakness due to disruption to customers' normal operations". At the current share price SGI is trading at a forecast 10% EV/sales in FY20, a 50%-90% discount to our designated distribution peer group. SGI is in the early stages of consolidation, gaining market share in its core business and expanding into new markets with a relatively low-risk business model. Taking current equity risk premiums into account, our DCF is now $0.27/share, implying significant upside from current share price levels.</a></p>
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Stealth Global Holdings Limited (ASX:SGI) has reported ~15% sales growth in its core Australian operations over 1H20, well above incumbents as it continues to focus on service and participate in national contracts for the first time. Other sales trends were as expected with the BSA (Bisley) JV in the UK building momentum and African sales declining as SGI exits this low margin business. On the earnings front, our key takeaway is that SGI is primed for operating leverage from core sales growth. Our understanding post 1H is that the group’s in-stock position and the relatively unaffected mine/infrastructure sites around the country have had minimal impact on trading to-date. Similarly in a statement released 19 March, Wesfarmers highlighted that its Industrial &amp; Safety division was "experiencing strong demand for critical projects including essential protective clothing, cleaning and hygiene products and medical gases, offset by some weakness due to disruption to customers' normal operations". At the current share price SGI is trading at a forecast 10% EV/sales in FY20, a 50%-90% discount to our designated distribution peer group. SGI is in the early stages of consolidation, gaining market share in its core business and expanding into new markets with a relatively low-risk business model. Taking current equity risk premiums into account, our DCF is now $0.27/share, implying significant upside from current share price levels.







Stealth Global Holdings - Primed for Operating Leverage

Australia

Wesfarmers Ltd. owns retail chains, operates mines, writes insurance, manufactures and distributes industrial products, manufactures fertilizers and chemicals, and distributes liquefied petroleum gas and medical and industrial gases.

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Wesfarmers Ltd (WES AU)

Stealth Global Holdings - Primed for Operating Leverage

Stealth Global Holdings Limited (ASX:SGI) has reported ~15% sales growth in its core Australian operations over 1H20, well above incumbents...

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