Michael Hill International (ASX:MHJ) Ready to Shine
Jason McIntosh discusses why overlooked ASX small cap Michael Hill International (MHJ) could be on the brink of a turnaround. This interview appeared on Ausbiz on 25 February, 2021.
Host: Jason, a stock you’re looking at is Michael Hill International [ASX:MHJ]. The company had some good results out. Tell us what you see with this stock.
Jason: Michael Hill is an interesting company. Whereas I often use momentum strategies to identify emerging ASX stocks, I also use it to help identify turnaround situations in more established companies like Michael Hill International.
From 2016 through to early 2020, the MHJ’s share price was really struggling. It was down close to 90%, and it hit rock-bottom at 22 cents during the COVID crash.
The interesting thing is that COVID may have helped some companies like Michael Hill. That’s because they’ve gone away and restructured. They've streamlined their operations and coming back in better shape.
Michael Hill’s first half results look good. Net profit was up 84% to $39 million and same store sales are up 6% to $312 million. And this is against a gloomy backdrop. The company said they lost 3,709 open days for their stores across the network. That's in Australia, New Zealand and North America. So that's a pretty big headwind to be going into and coming up with a good result. I think they've got a good turnaround story.
Probably the big driver for this company going forward is with their digital sales, which are up 102% to around $18.5 million. This makes up 6% of total sales. The company says it’s a priority to continue building the digital side of the business. It's not about shutting down bricks and mortar, but rather giving their customer base more options, and maybe opening up new markets.
Michael Hill has a dividend of around 2%, and there’s scope to increase this. I think if the need to conserve cash lessens as we go forward, then perhaps they can start paying out those funds to shareholders. The share price is also trending higher which is a key requirement from my perspective.
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I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney.
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.