HLG - Hallenstein Glasson

[trader_jackson]

They got a few million in the bank but that won’t last long

Be a new experience for them talking to banks for a loan to tide them over

At least they didn't pay it out in dividends...
Banks might not like them too much, not because its personal, but because its retail... Smith City has that feel good, been around 100 years+ feel and yet don't seem to be getting alot of love from their bank.

No worries, this time (or company) is different.

[macduffy]

Dito I would not call HGL an anchor tenant at all they are no supermarket or farmers or Kmart their floor area is modest in most malls compared to other retailers afterall. This could be different throughout the country but not the case in any Auckland malls .....

Okay, I'll substitute "valuable" for "anchor" which I realise is the term for the big supermarket/department store that takes up the big floorspace.

[Arbroath]

I'd say they are a valuable tenant in many malls in NZ as they have both a Hallensteins and a Glassons and would be paying quite a bit more per square metre than an anchor tenant like Farmers etc. So if I was a Kiwi Property exec for instance I'd want to retain a company with their track record because if they are going bust /leaving just have a think how many other vacancies they'd have in their malls, mainly because HLG operate a far more conservative business model. They will get some reductions/incentives to stay for sure...

[kiwidollabill]

A macro trend that I think that comes out of this is that it'll be what starts to kill brick and mortar retail (if that hasnt started already).

Those that'll be able to own the digital space as the main part of the customer experience will win in market share.

Gut feeling is that HLG will manage the transition quite well, IMHO Farmers, Myer etc will go the way of the dinosaur....

[macduffy]

Thanks, Arbroath. That's what I meant and you have said it so much better!

[Cyclical]

It blows my mind that this one is still trading at more than 50% above last week's low. Surely this stock is going to be hugely impacted by the unfolding events. People still in denial?

[James108]

It blows my mind that this one is still trading at more than 50% above last week's low. Surely this stock is going to be hugely impacted by the unfolding events. People still in denial?

The stock price has also been hugely impacted, moreso than most. Where do You see fair value?

[Cyclical]

The stock price has also been hugely impacted, moreso than most. Where do You see fair value?

Somewhere closer to $2, but edging lower by the day. Let's face it, they have virtually zero income, but the outgoings are still there. The longer this event drags on for, the less relevant their seasonal stock becomes. The weaker dollar will do them no favours (but there may be a glut in the market for suppliers to offset this). A good portion of their target market is about to find themselves out of work. A large portion of their shareholders will be used to the nice regular dividends, which will disappear for a while. Will the minimum wage increase affect them? The only light at the end of the tunnel is that they are probably better placed to weather the storm than much of the competition (some of which will disappear) and maybe they can negotiate lower leasing costs. 2 years of pain?

[James108]

Somewhere closer to $2, but edging lower by the day. Let's face it, they have virtually zero income, but the outgoings are still there. The longer this event drags on for, the less relevant their seasonal stock becomes. The weaker dollar will do them no favours (but there may be a glut in the market for suppliers to offset this). A good portion of their target market is about to find themselves out of work. A large portion of their shareholders will be used to the nice regular dividends, which will disappear for a while. Will the minimum wage increase affect them? The only light at the end of the tunnel is that they are probably better placed to weather the storm than much of the competition (some of which will disappear) and maybe they can negotiate lower leasing costs. 2 years of pain?

So to arrive at a fair value of close to $2/share what kind of losses are you forecasting? I checked my model and to arrive at a valuation close to $2/share earnings would look something like a $30m loss this year, break even next year and long term average EPS of 28c/share (down from long term average 35c/share and recent earnings of 40+c/share).

Personally that seems slightly pessimistic to me. Maybe useful as part of a downside risk valuation.

[Cyclical]

So to arrive at a fair value of close to $2/share what kind of losses are you forecasting? I checked my model and to arrive at a valuation close to $2/share earnings would look something like a $30m loss this year, break even next year and long term average EPS of 28c/share (down from long term average 35c/share and recent earnings of 40+c/share).

Personally that seems slightly pessimistic to me. Maybe useful as part of a downside risk valuation.

Running up some rough figures using your prediction of a 30% drop in sales, I think you are expecting more or less break even this year, is that about right? If so, you could well be right and things may not be as grim as I'm suggesting. Some might argue a 30% sales reduction is conservative, although the fact 2 thirds of the year is already gone might be a saving grace. But with a world of unknowns about how all this is going to pan out, a pessimistic bear market might dictate $2/share is not that unrealistic.