ROE we do not often disagree, however on this one we do! I think...

ROE we do not often disagree, however on this one we do!

I think that BRG may appear expensive but upon drilling down there are some factors which do affect the valuation...

The first is the monster $70m cash balance which can affect valuation models depending how it is dealt with.

Secondly, and for me is why I admire the company, is the way management runs the company. It really does appear that they are running it for the ultra-long term. The accounts show no evidence of short term thinking or folly to increase short term earnings.
It actually looks like management doesn't really give a sh!t about short term earnings and instead is focused on growing shareholder value by investing in the brand.

For example, the latest result shows another big spend in advertising (as a % of revenue it is above the longer run average), if management wanted to please the market they could have considered cutting this spend back to boost the EBIT figure.
I considered whether this was a result of their international expansions and showed lack of cost control, but the fact that occupancy and employee expenses (again as % of rev) are falling shows to me that cost control likely is not the issue and it is in fact the company investing heavily.
However instead of having to capitalise this investment, they are doing it a smart way (albeit at the expense of headline earnings) and receiving tax deductions.

Despite my above thoughts, I do still agree that BRG is no bargain...however I feel I am not alone with my judgements of the quality of this company and the way it is run and as such it trades at somewhat of a premium.

The loss of the CEO is a strange one, and something that is hard to factor in, which is why I think the company has lost 1/5th of its value today...providing an opportunity for investors with conviction in the Breville brand.