I have never felt more comfortable holding HLG. Far more likely to go to > $7 than < $5 in my carefully considered opinion. Then there's the dividends and oh my goodness...they really are going to be quite something.
My crude spreadsheet gives HLG a fair SP of $7.72 for the next 12 months and $8.49 in 24 months if that 10% growth is maintained.
I think prehaps a look at the statistics now and again would be a good thing. No to pore cold water on things but spring looks a bit rain.
Im glass half full, half empty at the moment. Stats people stats. Yes HLG performance is great and the stats point to increase in apparel yes for the economy. But there are other stats for the last quarter also.
I just cant see the market giving an apparel retailer a "hugely" "Bigly" higher PE in NZ. Once again the stats for the quarter are not in its favour for an explosion in the PE. Increase on the present P/E? yes very possible.
if the stock was a certain german brand or a Nike then sure.
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I just cant see the market giving an apparel retailer a "hugely" "Bigly" higher PE in NZ. Once again the stats for the quarter are not in its favour for an explosion in the PE. Increase on the present P/E? yes very possible......
I will be very happy if the SP stays around the $:6.00 mark. That means I can slowly buy more and get a return after tax of 6.3%. Far better than money in the bank.
6 dollars? Mr B has a run rate that is pretty good. We are just saying that the stats for apparel are not yet in a bull market Nike like stratosphere yet... awaiting the next quarters NZ economy stats with great interest.
6 dollars? Mr B has a run rate that is pretty good. We are just saying that the stats for apparel are not yet in a bull market Nike like stratosphere yet... awaiting the next quarters NZ economy stats with great interest.
To be fair HLG has been around almost 30 years longer than Nike, and has survived through a lot more recessions.
I think the fact that its a tightly held register doesn't do it any favours, it seems to go up and down based on the sentiment of a few.
For the life of me I cant see why its not worth more.
Where would you rather your money? a company that's been around for 70 years with no debt, majority shareholder owners involved in management , or "growth" companies like afterpay or ATM.
I think i'll take the company that knows how to withstand a recession.
To be fair HLG has been around almost 30 years longer than Nike, and has survived through a lot more recessions.
I think the fact that its a tightly held register doesn't do it any favours, it seems to go up and down based on the sentiment of a few.
For the life of me I cant see why its not worth more.
Where would you rather your money? a company that's been around for 70 years with no debt, majority shareholder owners involved in management , or "growth" companies like afterpay or ATM.
I think i'll take the company that knows how to withstand a recession.
Market sentiment always determines price not what we think a company is worth or not, you can't compare HLG in any way to APT or ATM as an investment and in fact you can't even compare the latter two they are so different, HLG is a longstanding trusted NZ divvy payer whilst APT and ATM are international monsters, the gains from the latter two for early investors is mind blowing along with XRO.
I believe earnings matter, (its my life's work), and sentiment is driven off people's perception of future earnings. Investing on sentiment alone is building one's house on shifting sands and the Bible warns about that. I invest, I do not speculate, (Its Sunday so I will point out again that the Bible warns about speculating too), I leave the "crazy" valuations of stocks like XRO and other SAAS and tech companies to others.
I just cant see the market giving an apparel retailer a "hugely" "Bigly" higher PE in NZ. Once again the stats for the quarter are not in its favour for an explosion in the PE. Increase on the present P/E? yes very possible. Waltzingironmansinlges
I'd like to consider this further so lets consider what is an appropriate PE for HLG.
I think the most useful yardstick is Briscoes which closed on Friday with a PE of 14.62. I think this is a widely respected retailer but there's a very important distinction between Briscoes and HLG (quite apart from what they sell), which is something I think the market is overlooking.
Here we see that ostensibly Briscoes isn't growing. Average earnings projection of analysts for the next 3 years out to FY23 of 28 cps are the same as the last 3 years ! (That's right, no growth out to FY23 compared to FY18. https://www.marketscreener.com/quote...62/financials/ Six years and no growth for Briscoes whatsoever and yet the market accords them a PE of 14.62 ! WOW...reflect on that for a while and ask yourself what the right PE is for HLG ?
Unfortunately analyst coverage on HLG doesn't appear to exist ? Market screener which compiles analyst coverage data has no forecast information, it merely records the last 6 years earnings data. https://www.marketscreener.com/quote...64/financials/ We have to be our own analyst with this one and there are one or two people crunching the numbers other than myself who I respect who are all signaling earnings growth and it should be clear from the companies own disclosure that current year sales have started very well.
When looking into the future with forecasting I will always believe the best guide to the future is the past. What we see with HLG is that in the last 3 years their average earnings have been 47.3 cps whereas the average earnings in the 3 years before that were just 27 cps. This is 75% growth most recently compared to earlier years which is in stark contrast to Briscoes numbers above. My vision for HLG is that as earnings continue to grow its likely it will be rerated to at least the 14.62 PE of Briscoes so my mid level estimate of 55 cps x 14.62 = $8.04 is where I see it in a years time. The possibility of NZX50 inclusion at some future point and analysts starting to cover this stock and the impact of these two things on the share price should not be overlooked. While we wait for that we have one of the highest yields on the NZX to enjoy !
So sheeting all this back to earnings matter again, what is my estimate of the current PE ?
My mid case is they can do 55 cps this year (they could potentially do 60 cents+) the shares currently trade on a theoretical ex divvy price of ($6.12 - 0.24) of $5.88.
5.88 / 0.55 = forward PE of 10.7. A no growth PE for where interest rates are is 12.0 in my opinion so HLG's forward PE makes no sense to me whatsoever.
I think that's very cheap for a company with Glassons excellent growth prospects. Even the Warehouse with its very "patchy" (putting it politely) track record and modest if any growth prospects trades on 14 times next years forecast earnings https://www.marketscreener.com/quote...64/financials/
In conclusion I think HLG is a very mispriced and underappreciated stock. In time if they keep growing earnings that will change. I can be afford to be a very patient investor when I'm being paid 11.8%* gross yield.
* Based on my estimate of 50 cps in dividends for FY21, gross dividends 69.44 / 588 = 11.8% gross.
Last edited by Beagle; 01-11-2020 at 08:59 AM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Thanks mate. I always greatly appreciate your work on charts like this. Its true ! A picture says a thousand words !
Forward PE of 10.7 is absolutely nuts for a company growing earnings at 20% per annum.
Last edited by Beagle; 01-11-2020 at 09:15 AM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Originally Posted by Beagle
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