Wilsons Advisory analysts believe that Nick Scali’s share price will start to trade at strong levels once there are signs that its product and brand are accepted as part of a global product rollout.
It follows Nick Scali’s acquisition on May 9 of Fabb Furniture in the United Kingdom for a nominal amount in exchange for taking on its debt. Its stores are to be rebranded Nick Scali.
“The key unknown will be the acceptance of the Nick Scali brand and product,” the analysts said in their note.
They ascribe a $2.80-a-share value to the UK business and believe Nick Scali will trade above its current level of 16 times net profit once there were signs of product acceptance and sales momentum.
The analysts believe that Nick Scali should be able to expand its brand at a faster-than-normal rate, due to ideal conditions for expansion from improving site availability with ongoing industry softness.
The analysts expect Nick Scali to have 43 UK stores by 2030, representing about 22 per cent of its revenue.
They said that a critical part of Nick Scali’s execution was the improvement in Fabb’s store economics over the next 18 months.
Wilsons has a 12-month price target of $18.30 on the stock.
Nick Scali shares were trading at $13.89 at midday AEST.
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