Eye of the storm or has it passed?, page-2

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slc4me

4,306 Posts.

01/09/16

09:56

Post #: 18848055
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Originally posted by rustys33 ↑

I'm looking into what to do with these TRS shares and I think the drop has presented a good buying opportunity. This has put succinctly my thoughts on TRS
Rusty

From CBA
Discretionary retailers
We have not had a buy recommendation on Harvey Norman or JB Hi-Fi for several years. Their share prices oscillate with short-term expectations about retail spending and profits, while the internet silently eats away at their competitive positions. And how many more Harvey Norman or JB Hi-Fi stores could Australia possibly need?
If these stocks get cheap enough we will consider adding them to the buy list, but there are better options for your money, in Intelligent Investor's opinion. Given Harvey Norman is no longer a growth company, it should also pay a higher dividend.
We recently published a comparison of The Reject Shop and Super Retail Group, as their respective share prices have fallen around 50 per cent and 35 per cent. We are still avoiding Super Retail Group but have recommended The Reject Shop as a buy below $11 for several reasons.
First, The Reject Shop's everyday products should be more resilient in a recession. Sales of $500 kayaks at Ray's Outdoors are likely to be delayed before the fortnightly supply of toilet paper is. A recession may even convert shoppers previously uninterested in saving pennies.
Second, The Reject Shop should be more insulated from the threat of online competitors, as the average customer only spends $10. Postage costs too much to justify opening an online store.
Third, the company has no debt. It has long-term leases that are quasi-debt, and rolling out new stores requires investment that reduces cash flow in the short-term, but it should not come under pressure from lenders to make short-term decisions at the expense of its competitive position. The recent failure of Retail Adventures has also reduced competition slightly.
Lastly, current earnings are artificially low because of the costs of the current store roll-out. There is a question mark over the company's strategy following the recent announcement of new CEO Ross Sudano, but provided recent profit downgrades do not reflect cannibalisation of the company's stores or a permanent loss of market share, the company should be worth more as new stores ramp up sales over the next few years.

Source: CBA

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Thanks for posting Rusty - out of interest how old is this report? Only ask because Ross Sudano has been in the job 2 years now so I would not call him new.

Cheers

slc4me

TRS Price at posting: $10.90 Sentiment: Hold Disclosure: Held
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Eye of the storm or has it passed?, page-2

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Eye of the storm or has it passed?, page-2

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Trigg brings famed Finnish metals refiner – and its tech – onboard to bolster antimony processing

Listen: HotCopper Wire Podcast 019 – Dreaming of the 9,000s

Telix sinks as US regulator SEC issues subpoena over claims

ASX Market Close: Iron awe keeps the XJO tracking along

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