Super Retail Group Floats the Boat by Treading Water; FVE Unchanged at AUD 7.20

No-moat-rated Super Retail calmed investors’ nerves by guiding to flat year-on-year group EBIT margins for fiscal 2018, excluding a contribution of AUD 5 million from the Macpac acquisition, which closed in early April. We maintain our group EBIT estimate of AUD 213 million, or AUD 208 million excluding Macpac, equating to an underlying group margin of 8.3%, 10 basis points lower than in fiscal 2017. At a group EBIT margin of 8.4%, in line with company guidance, we estimate EBIT increases by 2% to AUD 216 million. The accompanying trading update and other details were mixed, but not material to our near-term forecast or fair value estimate. Our five-year EPS and group revenue CAGR estimates of 4.0% and 4.5%, respectively, are unchanged. We reiterate our AUD 7.20 fair value estimate. The Super Retail share price rallied 9% on the update, surprising us, and shares now screen as slightly overvalued.