##{"id":58645,"date":"2011-08-09T10:36:43","date_gmt":"2011-08-09T00:36:43","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/08\/09\/thorn-group-remains-poised-for-growth\/"},"modified":"2011-08-09T10:36:43","modified_gmt":"2011-08-09T00:36:43","slug":"thorn-group-remains-poised-for-growth","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/08\/09\/thorn-group-remains-poised-for-growth\/","title":{"rendered":"Thorn Group Remains Poised For Growth"},"content":{"rendered":"

\n\t– Thorn Group sees opportunity in current macro conditions
\n\t– Meeting with management sees stockbroker Moelis<\/span> retain earnings estimates
\n\t– Buy recommendation unchanged on valuation grounds
\n\t– Other brokers similarly positive<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tThe challenges facing the Australian retail sector have been well documented but one company seeing opportunity in current conditions is Thorn Group ((TGA<\/span>)), thanks largely to the Radio Rentals division. This division rents essential household products and so tends to do well when there is any level of consumer uncertainty.<\/p>\n

\n\tStockbroker Moelis<\/span> recently met with management of Thorn Group and post the meeting sees no reason to shift from a Buy recommendation. Overall momentum for the Radio Rentals operations remains positive, though there is some variance between different product segments.<\/p>\n

\n\tAs examples, Moelis<\/span> points out while whitegoods<\/span> performance has been very strong, computer rentals have softened to some extent given this is the more discretionary of the product range for Radio Rentals.<\/p>\n

\n\tNew concepts such as kiosks and small, 1-2 man branches have been successfully introduced and Moelis<\/span> suggests the moves provide a low cost way to push increased volumes into the existing traditional store footprint. Management expects to have 5-10 of the new concept stores open by the end of FY12<\/span>.<\/p>\n

\n\tIn the view of Moelis<\/span>, the recent FY11<\/span> result highlighted the defensive nature of Thorn Group's earnings, as underlying net profit rose by 40% to $23 million. Around 40% of rental customers are on welfare, Thorn Group receiving payments directly from Centrelink<\/span>.<\/p>\n

\n\tAs well, the latest discussions with management indicate the recent National Credit Management acquisition is performing as expected. This leaves Moelis<\/span> to retain existing earnings forecasts for Thorn Group.<\/p>\n

\n\tThese forecasts in earnings per share terms are for outcomes of 20.2c<\/span> in FY12<\/span> and 21.8c<\/span> in FY13<\/span>, which compares to consensus EPS estimates according to the FNArena<\/span> database of 21.2c<\/span> and 23.1c<\/span> respectively.<\/p>\n

\n\tWhile Thorn Group shares have risen 43% over the past year Moelis<\/span> continues to see value given a FY12<\/span> earnings multiple based on its forecasts of around nine times. Even more supportive to the story is the defensiveness of earnings, as Moelis<\/span> expects the company will be able to generate low risk EPS growth of better than 10% regardless of the macroeconomic environment.<\/p>\n

\n\tMoelis<\/span> is not alone in taking a positive view on Thorn Group's prospects, as the FNArena<\/span> database shows a perfect three-for-three Buy ratings from brokers to cover the company. All agree the shares at current levels offer value, with RBS<\/span> Australia also pointing to Thorn Group's solid track record and clear growth options as reasons further upside can be achieved.<\/p>\n

\n\tThe FNArena<\/span> database shows a consensus price target for Thorn Group of $2.37, which compares to a $2.15 price target for Moelis<\/span>. The consensus target implies share price upside of better than 33% from current levels.<\/p>\n

\n\t
\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"