Date of Data Capture: 29/11/2018
Name: BABY BUNTING GROUP LTD (BBN)
Classification: Toys & Juvenile Products
Current Price: $2.27
Market Capitalisation: $277 M
Forecast EBITDA Growth: 39.78%
Yield Estimate: 3.64%
Consensus Price Target: $2.67
# Covering Analysts: 4
Discount at Current Price: 17.62%
Price Target Trend: Increasing-Flat
Signal Timeframe: Quarterly-Monthly-Daily
Trend Bias: Up-Down / Long-Short
Indicators:
Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive
Recommendation: Buy
Focus: Dividend Income & Capital Growth
Set up Notes:
· BBN looks ready to continue its recovery off fresh price support, and is backed by improving earnings, strong forecasting and signs of a new longer-term uptrend emerging here.
· An earnings slump over the last year is giving way to renewed growth and a greater recovery seems to be underway - this is backed by favourable expectations for expansion across sales, earnings and yield out to 2021.
· Pricing broke out of a twenty two month linear downtrend earlier this year, rallying up to major resistance before backing down to successfully retest new support as signalling turns positive.
· Price targets sit higher at $2.50, $2.70 and $3.00 with good support layered down to $2.00, $1.70, $1.60 and $1.50 if required.
Growth Focus: BABY BUNTING GROUP LTD (BBN)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
Patience can help you avoid making rash decisions, and sometimes it can help you get wind of a good opportunity after the market has already spat the dummy. We think we have both here with Baby Bunting Ltd as the children’s toy and clothing company looks to get back to its feet after taking a tumble.
Born in Balwyn 1979, BBN remains based in Victoria and has grown into one of Australia’s leading nursery retailers, operating 50 one-stop-shops catering for children aged 0-3. The company has a wide product offering, ranging from prams and nappies to furniture and food, including well-known brands like Ergobaby, Steelcraft and Bugaboo.
The stock is coming out of a tough year, which was caused in part by the failures of competitors and the knock-on effects of clearance sales affecting profits in the short-term. Hidden within this price decline is a great opportunity for enhanced recovery as it looks to capture this abandoned market share while also increasing own-label sales. Roughly seventy competitor stores have left the market and this offers a rare opportunistic market window and management are looking to drive growth with plans to ramp up to eighty stores, with five already opening in 2018, with two more expected by Christmas.
The slow 2018 is already starting to give way to new growth, with a recent update reporting stronger earnings and analyst consensus forecasts predict further strong growth out to 2021. There is a decent 3.8% dividend yield here that is set to continue rising past 5% within the next two years – but our main focus is capital growth and we like the broad expectations for aggressive sales, margins and earnings growth going forward.
Pricing has benefitted from the early signs of recovery with recent reporting helping to lift BBN out of a two-year downtrend mid-2018, with a sharp rally raising prices up from $1.50 to meet resistance at $2.50 before falling back to successfully test new support at $2.00 in recent weeks. With prices rebounding off support BBN now looks ready to go higher with positive signalling present across short, medium and long-term timeframes. We expect price to follow earnings higher and with a great recovery background picture, and exciting technical setup, we think Baby Bunting could be about to experience a newborn uptrend.
