ADVISOR WATCHLIST
Dusk has been a beneficiary of closed borders and lockdowns , they have numerous growth drivers which should support earnings over the medium term . Management recently guided to full year EBIT of between $ 38-40m which puts the business on an FY21 PE of around 8x and a fully franked dividend yield of approximately 7.5 %. Buy .
Nick Scali is a quality retailer of mid to high end lounges and household furniture . Like Dusk , Nick Scali has been a beneficiary of the closed borders and lockdowns of the past 12 months and consensus forecasts believes their earnings will drop approximately 26 % in FY22 . On management ’ s FY21 guidance numbers , NCK currently trades on around 11x earnings ( and a fully franked dividend yield of 5.7 %) and this would increase to around 15x earnings in FY22 if consensus numbers are correct . I believe the outlook for the business continues to look quite healthy and question the dramatic fall in earnings already forecast by the market . Firstly , the Australian consumer has dramatically improved their balance sheet over the past 12 months reflecting a boom in savings which has taken place . Secondly , the property market continues to perform well and the outlook is also very positive . Thirdly , management have guided to further store rollouts with 60 stores becoming 85 stores over the coming few years and possible expansion plans into New Zealand . Fourthly , they will be unveiling a new website with a strong online offering into new categories prior to the end of this financial year . It is worth noting they only began selling online last year and thanks to their distribution and store footprint , it was immediately profitable . Run by the founder ’ s son and major shareholder ( Scali Consolidated own almost 14 % of the business ), Nick Scali has an enviable 10 year track record with consistently strong returns on capital whilst employing no debt . Long-term Buy under $ 11 .
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