WHS - Warehouse Group

[BlackPeter]

OK - so the Warehouse obviously made a lot of mistakes and forgot to change with the times. Still - it must be worth something.

Their average EPS (over the last 10 years or so) are 25 cents, future average EPS estimated around 20 cents. Analyst consensus is $2.65, though coupled with an "underperform" recommendation.

A good board and management team would have plenty of opportunities to build on the strengths (and there still are some - the red sheds normally have plenty of customers (other than the blue ones) and Noel Leemings and torpedo 7 don't do too bad either) and lose all the redundant and inefficient ballast ...

So - how much would it be worth for somebody to pick it up (assuming Steven Tindall is prepared to sell) and turn it back into a better business?

What do people think is the underlying value? If I take the 20 cents future earning and a PE of 10 - This would make it $2 per share. If we accept a PE of 12.5 we are already at $2.50.

Add the 10 cents dividend (until end of the month) and some value for gaining synergies if somebody does tidy it up ... maybe the current share price does not look that bad?

[percy]

Try your workings with a PE of 7.5.

[BlackPeter]

Try your workings with a PE of 7.5.

Why is that - they don't fly or float (which would command a higher risk factor), don't they ?

[Beagle]

Forest would be very disappointed in the hound if he didn't weigh in with an opinion on this so here goes, all data based off average forecast analyst earnings off 4 traders website and focus is on next year's earnings which exclude any current year restructuring charges.

Market always looking ahead so I focus on FY 18 data.
WHS forecast PE 13.1
HLG forecast PE 12.3.

I would argue HLG is an extremely well run company with excellent well refined business practices and has no systemic issues that require dramatic restructuring of any kind and note top line sales growth is very comfortably outstripping the extremely modest rate WHS is "growing" their sales at.

As noted in previous posts and as noted by the CEO of WHS himself WHS faces ongoing significant potential restructuring issues and I would argue extremely serious challenges turning their finance operations around.

Given the known headwinds and slower growth rate and the fact that HLG is known to be a far more efficient retailer with best of breed stock turn I would argue the WHS should trade at a PE discount of at least 1, more fairly 2 to HLG.

If we said a fair FY18 PE for WHS was a 2 discount to HLG a PE of 10.3 there is potential for the current SP to fall from a PE of 13.1 to 10.3 = 21%.
If we said a PE discount of 1 is warranted there is potential for the current SP to fall from a PE of 13.1 to 11.3 = 14%.

In my opinion an ex dividend price of about $2.00 might be fair / good value going forward IF you believe, (I don't), in the current directors and management's business model and believe they can turn around the finance arm so its doesn't act like a sea anchor on future earnings.

[winner69]

Last time when things got bad Stephen offered $5.75 to buy the company back ....with the help of PEP I think it was

Would he offer to privatise it again .......or just call it quits and find somebody to take his shares off his hands - getting cheaper by he day eh

[Biscuit]

.... IF you believe, (I don't), in the current directors and management's business model and believe ....

I think that is the critical question. Don't touch if you don't trust the strategy/business model, and who could have any faith in that any longer?

[Hoop]

There will always be a good market for cheap rubbish. The problem isn't the product, its the perception and the competition. People buy even more cheap rubbish than ever, they just get it on Trademe, Briscoes etc.

Over the years the cheap rubbish has got dearer and WHS profit has not improved, so there lies the problem..Many years ago the Warehouse was a price disruptor with their smaller shops full of all sorts of bargains. Now its just a giant barn full of all sorts...gardening supplies and home hardware cheaper at Bunnings, Auto supplies cheaper at Repco or Supercheap Autos, Food and soft drinks cheaper at the Supermarkets etc etc...A retail scattergun strategy's weakness is it's lack of individual expertise/product/supply chain focus to compete effectively...They went some way to fix this problem in the Electronic/Whiteware area with Noel Leeming takeover...Years ago they had individualised speciality stores under the Warehouse roof...but for some reason they moved away from that..

[percy]

Why is that - they don't fly or float (which would command a higher risk factor), don't they ?

Retail is as always a very difficult sector to be in.
Even more so today with Amazon and other strong online retailers growing very quickly.
Bricks and mortar retailers such as The Farmers, Briscoes and Hallenstein Glassons are well focussed in their target markets.Even K-mart have moved ahead.
So WHS is lost in this tough market.They had to buy Leemings to source quality products,as rubbish was no longer acceptable,or profitable,ie you make no money on products that are returned.
They have kept adding to their cost structure with staff,and lease commitments.
I think the Normans would be able to reposition WHS.It would mean reducing the product range considerably,and making the store flow better.Cut out non performing departments and strengthen departments where they are strong.
In retail you either go forward or you end up going backwards very quickly.At the present time WHS has to find a strategy that will work.Whether they can or can not means it is a very poor,or dangerous punt.
Therefore one must be very careful on valuing WHS on dividend yield,PE or whether the Normans will make a takeover bid.

[h2so4]

Yeah. You might not make the grade if you gave your girlfriend a diamond ring purchased from The Warehouse.

[bull....]

I think there cheap apparel has a place in the market esp cheap kids clothing as for the rest agree they are trying to be jack of all but expert in none.

As for technical I believe all time low is happening so very bearish my long term channel down is currently under 2 dollars at this time.