Despite much negative press, boardroom battles, various operating headwinds, unfavourable FX, shutdown of the entire store network due to COVID and various lockdowns, the total amount of FCF generated by MYR (before dividends) in the five preceding years from FY16 to FY20 amounts to $272.4m (before restructuring costs) which is more than the current market capitalisation of the business. (Hopefully my back of envelope calculations are not too far off the mark)
If MYR is able to generate as much FCF in the next 5 years (which I believe it can, as we are heading into a much more favourable retail environment), shareholders will be able to enjoy effectively a ~20% per annum free cash yield on their investment, and enjoy the $120m-odd of franking credits available for dividend payments which should re-commence in the next 6-18 months.
Oh and another $50m of potential proceeds from property sales as you have alluded to. Near term, the future looks bright, unless we get a 2nd or 3rd wave + more lockdowns.
I've got to do more research to get conviction on the longer term viability of the business model - but I've done enough work to put down a small bet.
PS. Agree the banking syndicate is not stupid enough to pull the plug even if MYR breach all their covenants. Who do you think lends to all the major shopping centres in Australia? If an anchor tenant defaults, it could at worst cross-default half the listed and unlisted retail REITs in the country and at best add a fair chunk of extra provisions to every major bank in the country, as they are forced to assign higher risk ratings to their property books.
Thanks for the idea.
PS. did you see the NCK profit upgrade today?
MYR Price at posting:
29.8¢ Sentiment: None Disclosure: Held
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