Jeremy Hutton: Milford Asset Management expert on KMD Brands' share price going up after 'brutal' few months

After a tough year for KMD Brands, the company's luck is turning around on the share market.

The company behind Kathmandu and Rip Curl saw its share price go up by 17 percent, largely driven by Australian entrepreneur Josh Rudd buying 6 percent shareholding.

Milford Asset Management expert Jeremy Hutton outlined what this could mean for the company - and whether a full takeover is possible.

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Episode Transcript

Speaker 1 (00:00):
All right, let's go to Milford Asset Management and welcome
to the program, Jeremy Hutt. And hello, Jeremy. Hi, Andrew.

Speaker 2 (00:06):
How are you doing?

Speaker 1 (00:06):
Very good. Let's talk about KMD Brands. These are the
guys who own Kathmandu and Rip Curl. They've been in
the news this week. What's happening?

Speaker 2 (00:15):
Yeah, KMD Brands. And as you mentioned, owners of very
well-known retail brands, Kathmandu and Rip Curl, but they have
had a brutal 12 months or so on the share market.
But this week has been a little bit more positive
with the share price up. 17% or so. And this
has been driven by news that a very well-known surf
retail entrepreneur, Josh Rudd, has bought a significant 6% shareholding

(00:41):
in the business. This was released publicly yesterday. Now, this
doesn't mean there's going to be a full takeover happening,
but he is a successful Australian retailer. He's operated in
that surf and street segment. And in fact, Mr. Rudd's
original business, Gander, was also founded in Torquay, Victoria, which
is the same place where Rip Curl is from, too.

(01:02):
So you can probably say he knows the business very,
very well. And I'm sure he's going to have some
good tips to share to improve that KMD business.

Speaker 1 (01:10):
But like Adidas and Puma came out of the same
German city as well. And here's the thing. The KMD
bands board are listening because they have already signaled they're
going to do a strategic review of the business.

Speaker 2 (01:23):
Yeah, I mean, the share price and operational performance of
KMD has been pretty disappointing for shareholders over a number
of years. And this was exacerbated furthermore this year with
an emergency capital raise that they did. So shareholders got
diluted even more. But there has been a bit of
change in place. There's a new chair called Philip Bowman,
who's well regarded. And he pretty much straight away signaled

(01:46):
a strategic review to try and deliver some better value
for shareholders. And You know, those brands, Kathmandu and Ripcule,
they're pretty well known, especially in Australia and New Zealand.
They've even got a global presence. So I think given
the depressed share price, you know, there is potential for
a bit of value unlock here if they get some
transactions going.

Speaker 1 (02:04):
Yeah, the share price is already up 17% today, so
you have to wonder just how much upside. But their
earnings have been improving.

Speaker 2 (02:13):
Yeah, I mean, the management team recently upgraded their earnings
in July, upgraded their forecast. And this will be in
the range of double what last year's earnings were, albeit
they were coming off a very low base. But some
confidence there from the company that they're calling the bottom
in the earnings after a sliding few years. The equity

(02:35):
raise has taken a lot of pressure off the business operationally.
And there have been a financial press of a lot
of interest in that Rip Curl business in particular. And
then also an important point in that last trading update,
the New Zealand side of the business has been performing better. So,
you know, perhaps some of that cycle recovery coming through. So,

(02:57):
you know, a bit more interest happening in the KMD
brands coming up.

Speaker 1 (03:01):
Good stuff, Jeremy Hutton. I thank you so very, very much.

Speaker 2 (03:04):
For more from Heather Duplessy-Allen Drive, listen live to News
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Speaker 1 (03:09):
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