PGR and MYR

Well never say that a cheap stock can't get cheaper ;-). Obviously today's trading halt by MYR and reports of 5.5% decline in MYR's Q1 sales are not going to bode well for confidence in PGR. That said, I was running some numbers to see what impact MYR's woes could have on PGR. Myer concessions represented about $25.3m of PGR's total sales in 2018. If we assume that PGR;s myer concession sales will decline between 5% and 10% in 2019, this represents a revenue fall of $1.4m-$2.5m. If we assume that the full gross margin amount flows straight through to the bottom line (based on a 68% GPM), it would have a $1m-$1.7m impact on EBITDA. PGR's comments to date have only been focussed on the MYR concession business, so I haven't hit other parts of the business for weaker growth yet although it is always a risk in this environment.  Further, for FY 2019, I still expect earnings growth of about $2m EBITDA from JETs and Designworks, so its still possible for them to generate overall EBITDA growth.

Unfortunately we will need to wait until early in the NY as I doubt PGR will provide any update until the Xmas trading period is done and dusted. PGR must disclose if they believe H1 profit will deviate by more than 10% from the $8.4m recorded in H1 2018 (ie. less than $7.56m or more than $9.24m). Given the likely magnitude of the MYR concession issues, I doubt they would be in a rush to announce anything, but all just my opinion. 

As a final comment, I still stand by the strong investment case here, where the swimwear business is worth, on my estimates, at least 20-25cps, which gives you the rest of the business for 3cps at the current share price, when IMO its worth north of 40c. (On the swimwear business, they paid $12m for it in 2015 when it had annual revenues of $8-9m, but should be on track for $25m-$30m in the next 12 months). 

All views welcome, particularly from whoever is selling at 23c ;-)