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  1. #831
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    Quote Originally Posted by winner69 View Post


    PS .. from your comment about the upgraded mall it would appear that The Warehouse is starting to lose its attraction. More friendly shopping malls with plenty of specials (on more decent stuff) and more Bunnings and Mitre 10 Megas (stock a lot of the stuff The Warehouse does or did) and maybe even Briscoes are starting to chanage the competitive landscape
    Dont forget the two dollar shops , saw many people nipping in buying xmas decorations, wrapping paper etc. Previously they would of been heading into the warehouse

  2. #832
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    In my book, WHS still has t/o premium built into its price. Way to go yet to fair value ...

  3. #833
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    Quote Originally Posted by beacon View Post
    In my book, WHS still has t/o premium built into its price. Way to go yet to fair value ...

    Fail to see how todays price could have any take-over premium built in. Well capitalised company, produces good divedends and has proved itself to be relatively defensive during economic downturns. Admittedly has little growth prospects, but based on normalised profit has a P/E of 13.2, and is likely to produce a similar profit again this year, with small upside for Future years. P/e of 13.2 is easily justifiable in my book without takeover prospects, with these prospects, I tend to value WHS on a P/E of 15. Don't forget that Historically WHS has traded at a P/E raio of 20.

    Disl: Re-entered WHS at $3.84

  4. #834
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    Quote Originally Posted by Doyle View Post
    Fail to see how todays price could have any take-over premium built in. Well capitalised company, produces good dividends and has proved itself to be relatively defensive during economic downturns. Admittedly has little growth prospects, but based on normalised profit has a P/E of 13.2, and is likely to produce a similar profit again this year, with small upside for Future years. P/E of 13.2 is easily justifiable in my book without takeover prospects, with these prospects, I tend to value WHS on a P/E of 15. Don't forget that Historically WHS has traded at a P/E raio of 20.

    Disl: Re-entered WHS at $3.84
    Doyle you admit that WHS has little growth prospects. That means that a PE of around 13 must be hard to justify. Look at RBD trading on a forward PE of around 10 (share price $1.75) yet they have only refurbished half of their KFC stores and the sell off of the unprofitable Pizza Huts is yet to come. I would argue the growth prospects of RBD are better and it trades on a lower PE than WHS.

    Long term I think you will do OK out of the Warehouse Doyle, but I don't think that even if a takeover comes you will get anywhere near the $7 figures being bandied around a few years ago. That was all pre credit crunch. In the shorter term I think we could easily see $3.50 for the Warehouse. Don't get me wrong. I think WHS is a great company, better than RBD, but is it 30% better?

    SNOOPY

    discl: sold out of WHS at $5 some years ago.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  5. #835
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    I tend to agree with Snoopy that WHS is fully, if not overpriced at today's levels and that there is still some takeover premium there. Historical P/E's are irrelevant now that the growth phase is well and truly passed.

    I still think though that we will see WOW attempt a takeover at some stage. WHS offers the only option for WOW to replicate its Big W chain here in NZ, giving it a ready made network of suitable stores in good locations. I suspect that Foodstuffs would be happy to quit their 10% once it is clear that the WHS stores won't be competing in the supermarket/food sector. May need a side agreement to that effect!

  6. #836
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    Some interesting posts today.

    I tend to agree with Snoopy et al that a PE of 13 is unjustified given WHS flat growth, esp when RBD is trading on a lower PE with better growth prospects.

    RBD is also in an uptrend, while WHS is now downtrending.

    Two reasons why I'm a RBD holder and not a WHS holder.

  7. #837
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    It is interesting all the comparisons with RBD? Especially for me as I sold my WHS last June and put the money into RBD. I was thinking the shine had come off WHS and RBD was looking very good.

    It is nice to occasionally get it right!

  8. #838
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    [QUOTE=Snoopy;290180]Doyle you admit that WHS has little growth prospects. That means that a PE of around 13 must be hard to justify. Look at RBD trading on a forward PE of around 10 (share price $1.75) yet they have only refurbished half of their KFC stores and the sell off of the unprofitable Pizza Huts is yet to come. I would argue the growth prospects of RBD are better and it trades on a lower PE than WHS.

    Long term I think you will do OK out of the Warehouse Doyle, but I don't think that even if a takeover comes you will get anywhere near the $7 figures being bandied around a few years ago. That was all pre credit crunch. In the shorter term I think we could easily see $3.50 for the Warehouse. Don't get me wrong. I think WHS is a great company, better than RBD, but is it 30% better?

    SNOOPY

    Not quite comparible, in that RBD has turned out to be genuinely counter-cyclical where as the Warehouse is just realitively defensive. While you could argue RBD is a growth company I would big to differ, I think its peak in sales will be this financial year. The pick up in Pizza Hut is an aboration and in furture years it will continue to be a drain on profitability. KFC, is looking good but fast food is competitive, and if recessionary effects are dissapating and we start to see a tighter labour market, sales growth will slow (Counter intuitive). Starbucks could go either way, struggling at the moment but might be ok and Pizza hut is a great big anchor. If they figure out a way to cut pizza hut lose without to much of a loss I could become interested.

    But in Short there is a good reason why RBD is trading at a Forward P/E of 10 and WHS 13.

    P.S. If Woolworths really want it, they will have to pay a lot. Stephen Tindell hasn't expressed much of a desire to sell and has always said " That he doubts Woolworths would pay enough". This is perhaps the biggest hurdle to the takeover, still one can live in hope I suppose.

  9. #839
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    One way of looking at

    Currently WHS EBIT about $128M (assuming this year to be about the same as last year) which after tax gives Operating Earnings of about $90M .... driven from shareholder equity of $$320m and debt of $100m .... so a 20% return on capital .... fantastic performance

    At current shareprice market cap is $1.1 billion. So if you managed to buy the company it would cost you this $1.1 billion and you pick up the $100m debt so total cost (capital required) is $1.2 billion. All of sudden that $90m operating earnings is not that attractive .... it only gives you a 8% return on the capital invested (6% if you had to pay a 20% premium)

    So honestly .... would any of you if you had $1,4 billion buy something for a 6% after tax return .... esp when they have essentially saturated the market and future growth potential is rather limited without further capital.

    I doubt it ... therefore isn't WHS overvalued at the moment .... or there is some strategic value of the sites / footprint for a potential buyer included in the price.

    Same sort of thinking Buffet applies ... as Snoopy would probably say Warren wouldn't be buying WHS at these prices .... but at what price? .... at least a 12% return i would say to cover cost of capital ... ie about $2.10 a share.

    Is that what Warren pay Snoopy ... haven't checked your latest workings on sharechat

    Interesting

  10. #840
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    Quote Originally Posted by winner69 View Post
    One way of looking at

    At current shareprice market cap is $1.1 billion. So if you managed to buy the company it would cost you this $1.1 billion and you pick up the $100m debt so total cost (capital required) is $1.2 billion. All of sudden that $90m operating earnings is not that attractive .... it only gives you a 8% return on the capital invested (6% if you had to pay a 20% premium)

    Interesting
    Exactly. And WHS management are well aware of this fact. Expect a bond issue of 100m followed by a special dividend of 30cps mid year. This will re-lever the business and improve ROIC. Also a handy 15% yield for 1 year.

    Mark my words!

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