Hi pCap, @ 29c the market is valuing the company at $40m=...

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andrew a

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98

23/08/18

12:58

Post #: 35124989
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Originally posted by pCap ↑

The more I look into this result the better it gets (and Mr Market has been kind - thanks to those who sold to me at 31 and 29c this morning).

This result clearly reflects a new majority owner who wants to invest in the business now, likely for 2 reasons. 1) to depress near term earnings to support a new bid and 2) to drive earnings upside over the next few years to facilitate an exit.

PGR's sales are better than I had expected. Total revenues declined $5.3m, however this included $5.1m of discontinued unprofitable sales, and $4.7m of sales lost from closed unprofitable stores.
The lower earnings result was driven primarily by the investment in the setup for the new brand acquisition, and digital and other initiatives that should drive growth in the coming years. If this business was being run in a traditional public market manner, much of this expenditure would not have been made. That said, this type of investment is exactly what you would want as a long term investor and actually makes this business more valuable it was that without this expenditure. That said, public markets (particularly where trading is dominated by retail investors that just see the (meaningless) negative EPS number) struggle to see beyond the headlines and a media driven retail armageddon.

This is a diversified, successful retailer with a strong and growing online presence that is investing for future growth. Significant earnings upside is virtually guaranteed for next year. Given Colleseum have played their cards well so far, if the price remains anywhere near 29c, it would be very surprising for them not to lob a new bid (by the way, I would rather remain a holder until their exit as a bid will be well below what this business is worth).

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Hi pCap,

@ 29c the market is valuing the company at $40m= virtually at NTA- no value for the brands/ trade marks.

Looking back to 30 June 2016 when trading at 75c ($102m) & the retail sector was more optimistic than today- earnings were EBITDA $23.9m, NPAT $11.3m - Mr market valuation metrics of 4.25* EBITA and 9 times earnings.

Today the market cap of $40m -for 2017/18- Underlying EBITDA $13m - Underlying NPAT $3.6m approx , EPS 2.6c. Equates to 3 times EBITDA and 11 times earnings ( noting also at NTA backing).

Looking to 2018/19 - based on your numbers of EBITDA $16m - NPAT $6m - metrics at 29c = 2.5 times EBITDA and p/e 6.75 times.

Valuation at 4.25 times 18/19 EBITDA =$68m & 9 times earnings $54m = range 40c per share to 50c per share - Mid point 45c.

If Our major shareholder were to lodge a bid it may not be based on so generous multiples given the current retail environment but at the same time they would need to balance up the need to mop up remaining minority shareholders.

PGR Price at posting: 29.0¢ Sentiment: Hold Disclosure: Held
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