SUL

SUL was a decent enough result.

The first 6 weeks of FY24 trading don’t look great, by way of comparison, however.

We think this is to be expected, given rates/mortgage resets, impacting the consumer.

Management put quite a positive tilt on the above trading update, however, drawing attention to the 0%, and 2% group totals, as reasons to be pleased.

We thought that was slightly over-optimistic.

It i also worth being mindful of any pull forward in sales, due to the Matilda’s, which might fall away now.

Mgmt’s answer was excellent, but, the way things work, a short run negative followed by a long run positive is almost always a bad thing. We’ve already got a few stocks (like Amcor) going through that precise issue, so we wouldn’t want another. But still, the answer, below, is a good one.

Teasing out an extra snippet, from the Matilda’s question, is the commentary about July’s first couple of weeks. That sort of sharp drop is exactly what we are worried about.

It’s not “coming out of nowhere”, we get it, rates, EOFY sales, inflation, but the point is the size of the drop can be a material, negative surprise.

Now, the market already has a sizeable fall in forward earnings over the FY24/25 period.

So, if things turn out “less bad” stocks like SUL will do well. And leverage is quite low.

It’s not expensive, overall, but, with the cycle against it, we don’t see tremendous reason to be there.

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