Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
JB Hi-Fi expects big profit jump in FY20
JB Hi-Fi (ASX: JBH) has given another update to the market. It’s expecting a big profit jump in FY20.
About the company
JB Hi-Fi is one of Australia’s largest device and home appliance retailers with its network of The Good Guys and JB Hi-Fi stores. JB Hi-Fi was established in 1974 by Mr. John Barbuto (JB), trading from a single store in East Keilor, Victoria.
JB Hi-Fi update
The retailer has continued to see strong sales numbers in the second half of FY20 in Australia.
In the period from 1 January 2020 to 31 May 2020 compared to the prior corresponding period, JB Hi-Fi Australia sales were up 20% and The Good Guys sales were up 23.5%. However, JB Hi-Fi New Zealand sales were down 19.3%.
The company said customers continue to spend on items needed for working, learning and enjoying entertainment at home. The sales growth has more than offset the additional costs of ensuring COVID-19 safety in stores.
New Zealand sales suffered from temporary closures of stores, but Kiwi stores have now resumed full trading. In light of the uncertainty in New Zealand, the company is reviewing asset values and expects to report an impairment of $25 million after tax.
JB Hi-Fi CEO Richard Murray spoke of an upcoming reward for staff for their efforts during this time:
“I would like to thank our over 12,000 team members who have done an incredible job in meeting the extraordinary challenges faced over the past few months. Our customers have continued to turn to us for their technology and home appliance needs and our team members have responded and adapted in an amazing manner to make sure we can do it safely and effectively.
“We are in the process of finalising a recognition for our store team members to reflect their over and above efforts through this period and look forward to sharing this with our team before the end of the financial year.”
Is it worth buying JB Hi-Fi shares at today’s price?
JB Hi-Fi had previously withdrawn guidance. But it has now re-instated guidance, assuming conditions remain the same in June. Total sales are now expected to be $7.86 billion.
Total net profit after tax, after the New Zealand impairment, is expected to be in the range of $300 million to $305 million. This would be an increase of 20% to 22% compared to FY19.
I think this is very impressive growth considering how much the company has already grown over the past decade.
At a pre-open share price of $42, JB Hi-Fi could be an interesting idea for dividend investors. But I’m not sure that JB Hi-Fi will be able to match (let alone beat) the FY20 profit number in FY21. I’m cautious about investing, I’d rather go for a much smaller business with more growth potential like Bubs (ASX: BUB).
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