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Breville overvalued despite strong result

Lex Hall with AAP  |  17 Aug 2018Text size  Decrease  Increase  |  
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Appliance maker Breville is overvalued in Morningstar's eyes despite posting a 12 per cent jump in full-year profit.

Shares in Breville Group (ASX: BRG) have jumped more than 12 per cent after it announced its full-year profit rose 8.7 per cent to $58.5 million.

Total revenue for the 12 months to June 30 was up 7.7 per cent, to $652.3 million.

breville result kettle appliance article

Breville has declared a partially franked final dividend of 16.5 cents per share

The company's North American business was its star performer - growing 16.3 per cent on a constant currency basis to $303.6 million - in part due to the extension of its partnership with Nespresso in the region.

The agreement, which is already in place in Australia, allows Breville to sell co-branded Nespresso coffee machines.

Australia and New Zealand revenue grew 9.1 per cent to $123.9 million, despite the "somewhat challenged retail environment".

At the close yesterday, Breville's shares were up $1.45, or 12.46 per cent, to $13.09.

Morningstar analyst Daniel Ragonese has raised his fair value estimate by $1 to $10 but still maintains the company is overvalued.

"Despite the increase in our fair value estimate, shares in Breville remain overvalued. Breville shares currently trade at around 26 times fiscal 2019 EPS, which we believe assumes global product revenue and group earnings increase by almost 20 per cent on average for at least the next five years,” Ragonese says.

"This is an unlikely outcome, given the high-single-digit earnings growth generated during the past three years on average.

Breville, which counts Solomon Lew's Premier Investments as a key investor, plans to enter Belgium, Germany the Netherlands and Luxembourg in the 2018/19 financial year, as well as launch a new pizza oven in the US during the holiday period.

The company declared a partially franked final dividend of 16.5 cents per share, up 1.5 cents from a year earlier.

Breville cooks up full-year profit:

  • Net profit up 8.7pct to $58.5m
  • Revenue up 7.7pct to $652.3m
  • Final dividend up 1.5 cents to 16.5 cents, partially franked

 

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Morningstar with AAP

Lex Hall is a Morningstar content editor, based in Sydney.

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

. Lex Hall is content editor with Morningstar Australia

© 2020 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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