WHS - Warehouse Group

[winner69]

A lot of negative comments here which are shortsighted in my view. Sales for group are up 4.2%. NPAT is online for 80 million. They return good dividends. I dont believe competition is going to hurt them unduly...business's are not going to have an easy time matching WHS buying experience and proven ability to buy the right goods at the best price. Its the margin between buying and selling which in the end run will make a business succeed. Rents, payroll, overheads are roughly the same for everyone but the company that buys best has a big advantage. From what I have read over the years WHS has always done this very well. Buy it now if you are a holder..and even if you are a trader could be some good money to be made. Low share prices to me in this case are an opportunity not a call to abandon ship.
Disclaimer...obviously I hold these shares.

Mate the only negativity about WHS is that most see little growth potential in WHS .... they have reached a point of saturation in the NZ market and at best probably can only consolidate their market position while doing their best to maintain margins

Financially WHS performs bloody well .... but the punters say not well enough .... at least those punters with a growth mindset .... hence the shareprice drifting down

For all their (perceived) woes last year WHS returned a 20% on invested capital .... bloody fantastic and a return that most companies would envy .... even this years guidance (is actually $62m-$66m and not the $80m you mention) will result in a ROIC in excess of 15% - a company making excessive returns on capital .... truly wealth creating

So how do you work out what WHS is really worth? Even at 10% cost of capital and building no growth MVA is about $400m .... add WHS equity of just under $300 and market cap should be about $700 on this basis (8% cost of capital gives $770m). Market cap today $843 so reasonable if people still believe some growth is coming or a takeover premium.

Another way is look at dividend yield - say a 20 cent divie .... thats 7.4% or over 10% gross .... not too bad

So maybe current price is about as low as it will go .... or give it a few days for the growth punters to finally get out and it might be a little lower

The current discussion is similar to all the pages and pages on sahretrader about how a dog RBD is ..... RBD sales have always been around the $300m mark (slowly creeping up now) and except for a couple of years a while ago have always made decent returns on the capital invested ..... these days that return is over 50%. The point making is that RBD has for years seen as a dog ..... except for astute investors who recognise that high returns on capital will always lead to high dividends (even with pretty large capex requirements). Growth per see is not always necessary to make above average returns

So maybe look at WHS as a bond and if you can get 10% plus a year thats pretty good ..... if you want growth maybe WHS is not the place to be but in saying that the face value of the 'bond' will at least keep up with inflation

[BIRMANBOY]

So why are their profits falling? How does they compare with Briscoes? Don't they have good buyers too? And improving sales? And improving profits? And no debt and big bucks in the bank? Lower dividend though, although that may change considering their surge in profit?

So I am interested to know why I should buy WHS over BGR? Perhaps why buy either? I am interested in your thoughts. Cheers

BGR returns a dividend of approx 5.9% on your money...WHS at current price is returning 9.6%. If you are buying for mid to long term investment its obvious which one is looking good. I dont buy for growth or trade for profits in the share price since my primary focus is only for dividend yield...probably different than most people on this forum. "Share TRADER" is after all what its called. I see WHS as one of a dozen of my investments that will hopefully always keep me ahead of the battle against inflation and dropping term deposit rates.

[stoploss]

What chance slightly better news in the (H1) result tomorrow from WHS ,up 8 cents today in a pretty flat market ?

[macduffy]

Could be, stoploss.

But it's only a recent upturn on pretty average volume. I'm inclined to think that it's more a case of speculative buying on hope, rather than expectation.

[Lizard]

I'd be surprised if this result marked the turning point. Looks a little on the low side, terrible cashflow and big debt position (maybe larger than expected). Div about where I'd have picked, but maybe cut further than some analysts hoped.

I think it will still get down below my earlier $2.40 target and I have yet to review whether I'm sticking with that one after this result. At least their presentation recognises some of the key things we've talked about, e.g. mentioning that improving store experience is the critical enabler.

[macduffy]

Could be, stoploss.

But it's only a recent upturn on pretty average volume. I'm inclined to think that it's more a case of speculative buying on hope, rather than expectation.

Oops!



I should have checked for news before making that post! But about right, anyway.

[winner69]

Nice to see Te Awamutu getting a star mention .... good old Te Awamutu leading the way the WHS evolves into a more vibrant business .... good stuff

[macduffy]

Today's SP rise looks a little overdone to me. The result wasn't that good, as Lizard has suggested.

I put the reaction down to a combination of :

- A little better than expected.
- Market looking for reasons to rise.
- General firmness today.
I'd be surprised if the gains are held on Monday.

Disc: I hold a few, courtesy of speculation that WOW or Foodstuffs would make a bid.

[Lizard]

I'd be surprised if this result marked the turning point. Looks a little on the low side, terrible cashflow and big debt position (maybe larger than expected). Div about where I'd have picked, but maybe cut further than some analysts hoped.

...must have read it wrong (now $2.80). Will turn the report upside down this evening and try again...

[macduffy]

Don't bother, Liz.

First impressions are usually pretty good!