15-Feb-2021:  I have been watching Friday's "The Call" (from Ausbiz) today, and Ben Clark from TMS Capital (who I rate highly) and Adam Dawes from Shaw and Partners (not so much) both like CCX here, and had good things to say about them.  They both rate CCX as a "Buy" so it's now gone into "The Call" portfolio.  The commentary on CCX starts at the 35:30 mark.

Ben also added (right at the end) that some of the best small cap fund managers in Australia are on the CCX share register.  I've just had a look at that and only Spheria Asset Management are still on the substantial holders list with 5.96% of CCX (and they've been reducing their exposure lately).  AustralianSuper are also on there with 7.2% but that's far more a reflection of their "Member Direct" option that allows their thousands of members to choose their own stocks.  AustralianSuper is now Australia's largest superannuation fund, so they are popping up on a LOT of share registries.  Pendal and QVG Capital have both sold down now to below 5% (and possibly sold out, we don't know).  WAM Funds used to tout CCX as a "Strong Buy" but CCX are no longer showing as a top 20 position in any of WAM Funds' LICs, so I'm not sure who Ben is referring to there - other than Spheria.  It looks like most of them have locked in their profits already by either selling down or selling out of CCX.  Not exactly a huge surprise there really - because CCX has had a brilliant run.

Back in May last year, Wilsons (the broking firm, who are not connected with WAM Funds) had an "Overweight" call on CCX with a 12-month PT of $3.25.  CCX closed at $4.22 this afternoon, so I don't think Wilsons still rate CCX as a buy up here, being +29.8% higher than Wilson's May 2021 Price Target (of $3.25).

Arden Jennings from Ausbill said in July last year on a LivewireMarkets Buy-Hold-Sell segment that CCX was a high conviction position for Ausbill, and that CCX was in both their Ausbil Small Cap Fund and their Ausbill Microcap Fund.  CCX closed at $3.27 that day.  They are +29% higher now and have just announced a large overseas acquisition.  Not sure if Ausbill are still bullish on CCX, but they are certainly not substantial shareholders and it looks like they never were, so even when they were very bullish they never owned as much as 5% of CCX.  They could well be there with less than 5%, as could a number of other small company specialist fund managers, but I'd like to know who they are if they are still there.  More details please Ben!!

If anybody knows of any other small cap fundies who are still rating CCX as a "Buy" up here, please share.

30-July-2020:  In this LivewireMarkets Buy-Hold-Sell segment, Vishal Teckchandani discusses CCX (City Chic Collective), TPW (Temple & Webster) and UWL (Uniti Group, formerly Uniti Wireless Group) with Tobias Yao from Wilsons (Wilson Asset Management Group) and Arden Jennings from Ausbill.

Tobias and Arden both rate CCX, TPW and UWL as BUYS, and Arden said that both UWL and CCX were high conviction positions for Ausbill, with CCX in both their Ausbil Small Cap Fund and their Ausbill Microcap Fund.  However, both WAM Funds (Wilsons) and Ausbill clearly hold all 3 companies in their respective funds.

Tobias also likes IFM (Infomedia) and Arden likes LIC (Lifestyle Communities).

Warning:  Vishal's puns could elicit the odd groan...

26-May-2020:  Wilsons:  O/W: Online well ahead of expectations

Wilsons have an "Overweight" call on CCX and a 12-month PT of $3.25.  I would have gone more PC and said "Plus Size", but there you go...

25-May-2020:  COVID-19 Update

City Chic Collective Limited (CCX, formerly Specialty Fashion Group Limited) is up over +16% so far today on the back of this positive update.

31-March-2020:  Wilsons:  City Chic Collective (CCX):  “Third chances”

Wilsons have maintained their “Overweight” call on CCX.

Really?!  I would have thought “Plus-Sized” would have been more PC.

Excerpts:

In response to the escalation of COVID-19 in Australia and New Zealand City Chic has closed all of its Australian and New Zealand stores. This follows a trading update on 19 March 2020. We have accounted for the store closures in our forecasts which decline materially. However, we retain an OVERWEIGHT recommendation given; (i) strong and growing online business in Australia and North America; (ii) attractive multi-billion dollar end market; and (iii) potential early recovery story amongst listed peers.

Key points

Valuation: TP of $2.00/share reflects a downgrade of 33.2% (vs. prev.) and is based on a DCF methodology. CCX is trading on FY21e PE of 10.8x vs peers on 14.8x and the XSO on 9.9x.

Model changes: Material changes to forecasts. Our EBITDA forecasts decline 15.2% and 9.9% to $30.2m and $39.2m in FY20e and FY21e respectively. FY20e forecasts reflect 2H20e EBIT of $11.2m (+40.8% yoy) and conservatively assume six weeks of store closures in Australia and New Zealand. Operational cost reductions only provide a small offset (not standing down staff).

Store closures: CCX closed its New Zealand stores (11 stores) on 25 March 2020 and its Australian stores on 29 March 2020. We assume all stores are closed for a period of six weeks in our revised forecasts, which negatively impact 2H20e revenue by $8.6m. CCX has small wholesale operations in North America and we forecast some impact in that business too.

Online model: CCX has the most diverse, robust and high growth online business in our consumer coverage universe. Underlying revenue increased 52.2% yoy to $54.4m in 1H20a (51.9% of group sales), with the full benefit of the Avenue and Hips & Curves acquisitions yet to be realised. Our revised forecasts reflect Australian and North American online stores an alternative channel for store inventory and also the likely channel to experience faster growth once macro conditions stabilise.

Capital event: As at 1H20a CCX had net debt of $2.3m. We forecast this to increase to $8.9m in 2H20e due to softer sales and the acquisition of Avenue. While we also expect working capital to increase in 2H20e, CCX is a cash generative company and unlikely to require equity in the near-term.

Risks and catalysts

Key risks: 1) Poor Spring trading period; 2) aggressive discounting by peers; and 3) headwinds from US wholesale customers.

Key catalysts: 1) Stronger-than-expected LFL sales growth; 2) MOZ trading…

[click on the link at the top of this straw for more]

24-Oct-2019:  Wilsons:  City Chic Collective (CCX) - FY21e EBITDA +12.1%

Wilsons call on CCX is "Market Weight" with a 12-month TP of $2.84.  CCX closed on Friday (Nov 1) at $2.69.

City Chic’s acquisition of Avenue Stores LLC (Avenue) was completed on the 17th of October 2019. It marks the second North American online acquisition for City Chic this year, allowing us to better appreciate its omni channel strategy. We expect the acquisition to deliver attractive medium-term earnings growth through a combination of an additional category (Value) as well as additional pull through for its existing range (Glamour). However, City Chic is trading on FY20e PE of 28.3x, well ahead of peers, and reflective of this growth potential. We retain a MARKET WEIGHT recommendation. 

Key points

Valuation: We value CCX on a blended methodology (DCF, PER and EV/EBITDA). Our valuation +29.0% to $2.84/share and reflects a FY20e PE of 28.3x. The increase in valuation is driven by a higher DCF (earnings upgrades) and change in comparable peers to include those with successful international expansion strategies (BRG, LOV and PMV).  

Earnings: We have consolidated Avenue into our forecasts. FY20e forecasts are largely unchanged. However, we expect Avenue to contribute EBITDA of $4.4m (US$2.9m) in FY21e and our group EBITDA forecasts +12.1% to $40.6m and are now 3.5% below consensus ($42.1m).  

New strategy: Given different pricing points and already established channels for the City Chic range, we believe this is a “stake in the ground” for the early stages of CCX entering another parallel category. It added Street and Lingerie ranges in FY19a. The acquisition also provides cross-selling opportunities for the City Chic range to Avenues’ 300k-600k active customers (database).

Avenue Stores LLC: Avenue Stores LLC filed for Chapter 11 bankruptcy protection in August 2019 and liquidators promptly closed 200 of its remaining physical stores, leaving the e-commence store. We estimate it achieved annual sales of US$65m ($97.0m) and is moderately profitable on a standalone basis.  

Cash flow: CCX paid US$16.5m ($24.6m) for Avenue Stores LLC and advised it would fund the acquisition from existing cash and credit facilities as well as an additional $12.5m 12-month facility. Due to the strong cash generation from the legacy business and timing of the acquisition, we assume minimal debt is required.

Risks and catalysts

Key risks: 1) Poor Spring trading period; 2) aggressive discounting by peers; and 3) headwinds from US wholesale customers.

Key catalysts: 1) Stronger-than-expected LFL sales growth; 2) 1H20e result.