Recently, two stocks have hit lows during this reporting season and I want to look at what bargain opportunities there might be. Both are suffering a slowdown in business, but for long-term investors that pause in share price gains may signal a chance to pick up quality stocks when the market is pessimistic.
JB Hi-Fi Limited (ASX: JBH)
The electronics and appliance retailer slipped under $17 a share to set a new 52-week low at $16.61. Although it raised full year net profits 10.3% and earnings per share were up 9.1% for FY 2014, the company noted sales of iPads were weak in the second half. Consumer sentiment has also sagged since May.
The company's new format JB Hi-Fi HOME stores showed solid same-store sales and its new store rollout is still planned to have 75 HOME stores by FY 2016, up from the present 22. The full benefits of the HOME store rollout will be seen over the next two years. On the positive side, the final dividend was raised to 29 cents per share (cps), up from 22 cps. That brings the full year dividend to 84 cps, up 16.7% from FY 2013.
The share price may slip down further on short-term retail trade weakness, but the quality of the company is intact, so the sell-off could open buying opportunities.
SKYCITY Entertainment Group Limited-Ord (ASX: SKC)
The casino operator reported an 8.1% drop in normalised earnings expressed in NZ$, but when translated to Aussie dollars, the normalised net profit was up 4%. The final dividend was raised one cent to 9 cents per share.
The share price has been trending down since mid-June, from about $3.80 to the $3.27 52-week low hit on 11 August just before the full year results came out. It has rebounded to $3.43 already.
The Auckland casino has been doing well, but the Australian casinos have been weaker. The Adelaide casino is being redeveloped currently, so the construction is affecting business there. This casino has seen an increase in its international visitor business, which is promising. Still, the construction is holding back those benefits.
Again, like JB Hi-Fi, short-term issues are affecting revenue and earnings.
