Ann: ADH 1H FY2021 Results Announcement, page-49

A few more thoughts on why ADH is value lying out in plain sight......

• ADH online channels of Adairs&Mocka had 1H FY21 sales growth of 160% vs 120% for TPW, and is vastly more profitable than TPW. If last two years growth trends are maintained ADH on-line will run down TPW in foreseeable future!
• ADH will be added to the S&P ASX300 index in a month or so time, and this stock is quite sensitive to any buying pressure, so when the ETFs and index tracking funds arrive it is likely to respond
• At Dec 2020 ADH had circa net cash of $22mm. This will be reduced by the JobKeeper refund and a circa $15mm “earn out” payment to former Mocka owners (which is actually good news as it highlights what a bargain the Mocka acquisition was for ADH shareholders). However ADH is generating strong free cash and will almost certainly have circa $25mm net cash again when the directors consider the final div in Aug 2021. So we can expect either a significant lift in final div, or a capital management initiative if they do not wish to bake in higher dividends, or even better, another Mocka like acquisition funded from cash and debt (no equity)
• On an EV/EBITDA valuation and using unchallenging multiples of 5x for stores and 10x for online, it is about $7.00 per ADH share
• In 2H FY21 ADH will be cycling the worst of the 2020 Covid store closures, so the results against PCP will look outstanding.
• The new DC cost savings will be a good foil to any consumer spend “reversion to the mean” in the back half of CY2021

DYODD

LS9