CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Richemont pre results

Swiss luxury goods maker, Compagnie Financiere Richemont, is set to release full year results on Friday 12 May 2017

Shaun Murison ShaunMurison_IG
Senior Market Analyst, Johannesburg

Publication date : 2017-05-11T10:46:23+0100

The company which boasts a portfolio of leading luxury goods, particularly in the jewellery and luxury watch divisions, is expected to report a lacklustre financial year once again.

Despite having an improved quarter (ending December 2017), the nine months to December were weak across both region and business division’s. The below graphs illustrates these in both constant and actual exchange rates.

Estimates

It appears unlikely that a positive fourth quarter will be enough to offset a soft first nine months of the year. Full year (FY17) revenue is expected to be realised within the EUR10 640M and EUR10 703m range. This would equate to a decline of around 3% to 4% from the corresponding financial year (FY16). Net income will find a high base of comparison against the previous financial year where a EUR639 million non-cash gain was included from the merger of The NET-A-PORTER GROUP with YOOX Group. JP Morgan estimates FY17 could see a decline of as much as 40% in net income while consensus of Reuter’s analyst estimates arrive at an implied decline in net income of 27%.

The mean of analyst estimates reported by Reuters arrive at a longer term target price of R105.10 a share (CHF79.64 for the primary Swiss Listing). This suggests Richemont, trading at a share price of R113.65 on its Jse listing and CHF85.55 on its Swiss listing (at the time of writing), might be trading at a 7% to 8% premium to what is widely considered fair value by analysts for the share.

Thoughts

The Richemont group remains a quality company with a strong balance sheet, an enviable portfolio of luxury goods and a retail footprint extending across the globe. The slowing rate of decline in sales from the Asia Pacific region is encouraging, with China the possible future catalyst for long term growth for the company. However trading at a Forward price to Earnings ratio north of 25 (Swiss listing), while earnings growth is not being realised suggests the share to be expensive at current levels.

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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