The Noni B Limited (ASX: NBL) share price has doubled in just two years. If it wasn't for the recent share market volatility, I could have been talking about a 170% gain.
Noni B is a fashion retailer that is growing at a fast pace both through organic growth and its recent major acquisition. In-fact, it has grown so much that it's getting close to the market capitalisation size of Myer Holdings Ltd (ASX: MYR).
In FY18 Noni B achieved impressive results with revenue growth of 17.6% to $372.4 million, like for like sales growth of 4.5%, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 62.7% to $37.2 million and net profit after tax (NPAT) growth of 431.6% to $17.3 million.
A key part of the recent share price growth performance has been the acquisition of Millers, Katies, Crossroads, Autograph and Rivers brands from City Chic Collective Limited (ASX: CCX), formerly known as Speciality Fashion Group.
Under the ownership of Specialty Fashion, these five businesses were loss-making. It made sense for City Chic Collective to sell them – it would raise cash and improve the company's bottom line. For Noni B it doubled the size of the group and should lead to nearly $1 billion in revenue.
However, at the recent Noni B AGM, management said that the integration is going better than expected. The plan for the new businesses was to be break-even on an EBITDA basis in FY19, with annualised merger benefits of $30 million which would be achieved by the end of FY19 and be fully reflected in FY20.
But, now management are expecting positive EBITDA in FY19 with $30 million of savings already achieved. A further $20 million of annualised savings could be possible by FY20.
Management now think that full year EBITDA could be around $45 million and that FY20 EBITDA could be around $75 million.
If the company achieves the above numbers then it could be good value at today's price under $3, combined with a grossed-up dividend yield of 6.7%. However, retail is a very tough space with a lot of competitors, so there may be better investment options out there.
