djs price predictions

My price prediction over over the next few months: $1.70. After that, private equity will swoop.

Here's my reasoning:

* DJ's has said that full year profits may fall by 30%-40%. I reckon this will affect the dividend. The dividend might fall to 18c, or maybe 19c or 20c. As DJ's is primarily a dividend share these days (currently showing @ a yield of 11.9%- I reckon that isn't sustainable), the market will, if the dividend falls, drop the SP so that they get a yield of 10%. Traditionally and in better times, the yield of both DJ's and MYR was about 8.8%, but with retail the way it is, a 10% wield or more, will be the new expectation. If the dividend is 18c, the SP will fall to $1.80. Ex-dividend, with the SP at around $1.70, PE will then enter the fray.

* PE has said it will triple its return if it buys DJS for $2.20. $1.70 with a 30% premium is about $2.20. They have said there would be an IRR of 17% @ $2.80. Some articles have said that PE would not spend more than $3 on DJS. A $2.20 takeover would look unthinkable with a DJS SP of $2.14, but needs $1.70 to make it happen.

* DJS floated in 1995 @ $2, but its shares fell to 90c. For all the years between 1999 and 2003, the SP ranged between $1 and $1.50. Te DJS share price rose like crazy from 2004 - 2007, to be at about $5.75, fell to about $2.25 in Feb, 2009, and ten rose again to about $5.75 in October 2009- just in time to have a significantly higher SP than MYR's float price of $4.10. When it became apparent that MYR was significantly overprice, both MYR and DJS fell. What is interesting about these prices is that it has taken some time, and a very bearish market for bricks and mortar stores, to see a clearer picture of value or "worth" for these two stores. What is also interesting is that the 25%-30% premium that DJS had over MYR has now turned into some 30c (that was a few days ago)- but it seems to be narrowing.

* The advantage that MYR may now have over DJ's is that it has been an earlier mover to online sales. DJS resisted that (and under previous management did so too), due to a different demographic. Now that the demographic is probably not so different, DJS has moved to online, but this has not yet showed up in sales. It does represent a disadvantage, though, because DJS is now self-admittedly behind the 8-ball.

* Looking at the past SP of DJ's, the Aussie recession and subsequent years did DJ's no favour, but it also had no listed competition to compare to. We are not in a technical recession now, but the online shopping trend looks set to continue, so one could say that bricks and mortar shops have a new structural recession- and one that is not so easy to pass out of through better economic times. So is the $1.00-$1.50 SP again possible? Perhaps. But about $1.70 seems more likely. Why? The real estate. Retail has been thumped, but prime real estate- with a very possible tenant- has not been so thumped. PE could make a motza on this. The median price of the real estate, from media articles, is thought to be worth about $750m. With a SP of $1.70 (ex-dividend) or 20% less that it is now, the entire DJS business, sans real estate, would only be a few $$$ hundred million. An exit strategy would then not be such a worry.

* Simon Marais (Orbis/Allan Gray) just paid an average of $2.60 per DJS share for 5% of the company. Ok, so he paid too much (unless one thinks DJS will go much higher going forward). However, his funds seem unlimited, and he tends to buy more of companies he is in. He could reduce his average to $2.30 and then perhaps to $2 by spending more- or if DJS share price falls off a cliff and he keeps buying. If there was an offer of $2.20, he could, as a shareholder activist, push PE to $2.50 or maybe $2.75, and get a return on his money.
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Anyway, the above is all a guess. I've just been looking at historical share price, current trends, overall figures- but not in a fundamental analysis way. MYR could at some point also outdo DJ's SP and funds could be moved from DJ's to MYR, causing a further cascade for DJ's.

What are people's thoughts? Is $1.70 a very bearish price aim? It's exactly 20% off the current price. Is that possible? If it ever does reach $1.70, it's a strong buy, imo. Half year results come out in a few weeks, and I presume they will include dividend information. The dividend will be the driver, imo.