Daily ShareChat: Michael Hill International

By Jenny Ruth

Thursday 14th October 2010

Michael Hill International's first quarter sales figures showed strong same-store (stores open more than 12 months) sales growth trends in all its markets, says Guy Hallwright, an analyst at Forsyth Barr.

New Zealand sales growth was 12.8%, the strongest quarterly growth since early 2008, while Australian sales were up 9.1% in local currency terms and Canada's were up 28%. While US sales fell 21.5%, this reflected store closures and same-store US sales were up 26.5%.

"Factoring these into our forecasts increases our 2011 and 2012 forecast sales by about 5% to 6% and our profit forecasts by around 3%," Hallwright says.

"MHI management was happy with the gains made in all markets in the first quarter, although the high growth achieved was against a previous comparable period which was still GFC (global financial crisis) affected," he says.

"The importance of the next quarter to the full year result was reiterated - MHI typically makes around 75% to 85% of its profit in the first half." Hallwright is anticipating a positive second quarter result.

He is now forecasting a $34.1 million normalised net profit for the year ending June 2011, up from his previous $33.2 million forecast, and $0.2 million for the year ending June 2012. Hallwright has also raised his valuation of the shares from 88 cents to 91 cents.

Recommendation: Accumulate.

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