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Sunil Rajak

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Sunil Rajak is an analyst for Gridstone Research (http://www.gridstoneresearch.com/).

My business:: Gridstone Research

Is U.S. Auto Sales Bottomming Out?

Possibly there is no clear-cut answer to this about the future direction of U.S. auto industry currently in such a uncertain times. However, looking at recent monthly auto sales one notices some positive upward sales trend.

Data source courtsey is from Gridstone Research.
Further to test upward momentum, which possibly is in its nascent stage, a trailing twelve month (TTM) chart depicting both linear and logrithmic trends confirm the directional uptrend.

Data source courtsey is from Gridstone Research.
Further bifurcating the U.S. auto industry among US & European players and Japanese players, one notices that both set of players are likely to witness and increase momentum of sales pickup in coming months.

Data source courtsey is from Gridstone Research.
Conclusion
While part of back gear shift in terms of volume sales is due to macroeconomic situation no less this is an opportunity for some players to emerg stronger by bringing in much needed operational efficiency and product leadership. Ford Motor has been one such player which has steadfastly taking stock of its market environment and adjusting its capacity.
Ford has experienced sequential sales uptrend across all its brand. [I am not considering y/y trend because the macroeconomic situation is quite fluid as of now and one need to see trend on month to month basis].

Data source courtsey is from Gridstone Research.
Car and truck sales volume (of Ford) is experiencing sequential uptrend.

Data source courtsey is from Gridstone Research.

Tags: HMC, GMGMQ.PK, F, NSANY, TM, DAI, U.S. Automobile Industry

Apr 27 10:01 am | Link | Comment!

HCSG: Investment Performance Largely Led Incremental Overall Growth

Himali Madye also contributed to this article.

Healthcare Services Group, Inc. (NASDAQ:HCSG) reported a 9% y/y growth in sales revenue, net to $160 M. Sales revenue growth is contributed by less than 6% increase in revenue from Housekeeping and 25% increase in Food service.

It recorded a 13% y/y growth in Diluted-EPS to $ 0.18 in 1Q FY09, beating market expectations and share price rose around 19% on April 15, 2009.

However, on a closer look one finds that in the QE Mar-09 quarter, the company's investment of its cash and cash equivalent assets in marketable securities has helped in increasing its investment income by twice the year-ago amount to $0.9 million. If one excludes the increase in investment income of $0.6 million, the comparable income before income taxes shows an increase of 10.1% only instead of reported increase of 12.8%.

Thus its investment return has added quite handsomely to its reported net income as well EPS growth.

Exhibit: Investment returns boosting overall performance

HCSG	QE Mar-08	QE Mar-09	Y/y % Chng	FYE Dec-07	FYE Dec-08	Y/y % Chng

Sales revenue, net	147.3	160.4	8.9%	577.7	602.7	4.3%
Operating income/(loss)	10.8	11.6	7.5%	44.1	41.9	-4.9%
Income from continuing operations before taxes	11.2	12.6	12.8%	48.1	43.3	-10.0%
Net income/(loss)	6.9	7.7	12.8%	29.6	26.6	-10.0%

Weighted average shares outstanding-Diluted	44.2	44.1	-0.3%	43.8	44.0	0.4%
EPS-Diluted	0.16	0.18	12.5%	0.67	0.60	-10.4%

Interest income / (expense), net	0.3	0.9	189.2%	4.0	1.3	-66.5%
Marketable securities, net	0	51.9		0.0	49.4
Cash and cash equivalents	97.0	44.5	-54.1%	92.5	37.5	-59.4%

Cash dividends per common share	0.13	0.17	30.8%	0.42	0.58	38.1%

Source: Gridstone Research

In its conference call, HCSG noted that it has exceeded its client retention target of 90% in 1Q09 and expects top-line growth of 10%-15% in FY09.

So, while its core business remains stable and growing, its future incremental growth is somewhat contingent on the outcome of how well it makes its investment decisions.

Business Description of HCSG: Healthcare Services Group, Inc. (HCSG) provides housekeeping, laundry, linen, facility maintenance and food services to the health care industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. The company renders these services to approximately 2,200 facilities in 47 states as of September 30, 2008.

The company organizes its business into two reportable segments: housekeeping, laundry, linen and other services (Housekeeping), and food services (Food).

The services provided by the Housekeeping segment primarily consist of the cleaning, disinfecting and sanitizing of patient rooms and common areas of a client’s facility, as well as the laundering and processing of the personal clothing belonging to the facility’s patients. Services also include the laundering and processing of the bed linens, uniforms and other assorted linen items utilized by a client facility. The Housekeeping segment provides services in Canada, although the United States accounts for almost entirely all the revenue.

The Food segment develops a menu that meets the patient’s dietary needs, and includes the purchasing and preparation of the food for delivery to the patients. This segment provides services solely in the United States.

Healthcare Services Group provides its services primarily pursuant to full service agreements with clients. In such agreements, Healthcare Services Group is responsible for the management and hourly employees located at clients’ facilities. The company also provides services based on a management-only agreement for a very limited number of clients.

Healthcare Services Group operates three wholly-owned subsidiaries, HCSG Supply, Inc. (Supply), Huntingdon Holdings, Inc. (Huntingdon) and Summit. Supply purchases, warehouses and distributes the supplies and equipment used in providing the Housekeeping segment’s services. Huntingdon invests the company’s cash and cash equivalents.

Tags: HCSG, Industrial Outsourcing Services

Apr 16 06:58 am | Link | Comment!

ROST is Operationally Better Placed than its Peers to Deliver

[Arun Nair has also contributed to this article]

Based on our analysis below we find that ROST even in the current environment has been able to maintain a strong cash flow position and capital structure on the back of its above-average operational performance. And based on the latest two monthly sales data we expect ROST to post a healthy sales growth and operational performance along with maintained cash flow position for QE Apr-09.

Consistent above-average sales growth: Comparing the monthly sales performance of Ross Stores, Inc. (NASDAQ:ROST) with respect to its peers we find that ROST is charting a stable above-average growth in the apparel and clothing retail industry. The average y-o-y monthly sales growth and average y-o-y monthly comparable store sales growth of 9% and 3% respectively are above the peers’ average. Also stability of its sales growth is better when compared to its peers. The standard deviation of y-o-y sales growth and y-o-y comparable store sales growth for ROST stands at 4% and 3% respectively which is lesser than its peers. (Click here to see details)

New stores contributing to growth: The annual sales per store have increased from $6,533 in FYE Jan-05 to $6,785 in FYE Jan-09. The annual sales per average selling square footage have remained flat from $297 in FYE Jan-05 to $298 in FYE Jan-09. The number of stores has increased from 649 in FYE Jan-05 to 956 in FYE Jan-09. The average y-o-y non-comparable store sales growth of 7% shows that even the new stores are performing well and contributing towards revenue growth.

Exhibit No 1: Store level performance of ROST from FYE Jan-03 to FYE Jan-09

	Unit	FYE Jan-03	FYE Jan-04	FYE Jan-05	FYE Jan-06	FYE Jan-07	FYE Jan-08	FYE Jan-09
Sales revenue, net	$M	3,531	3,920	4,240	4,944	5,570	5,975	6,486
y/y growth			11%	8%	17%	13%	7%	9%
Selling square footage	K	11,843	13,321	15,253	17,319	18,642	21,100	22,500
y/y growth			12%	15%	14%	8%	13%	7%
Sales per average selling square foot	$	316	312	297	304	305	301	298
y/y growth			-1%	-5%	2%	0%	-1%	-1%
Sales per store	$	6,965	6,902	6,533	6,736	6,989	6,714	6,785
y/y growth			-1%	-5%	3%	4%	-4%	1%
Number of stores-Total	#	507	568	649	734	797	890	956
y/y growth			12%	14%	13%	9%	12%	7%